Spectranetics Posts Third Quarter Results

Oct 31, 2008 (M2 PRESSWIRE via COMTEX) -- SPNC | Quote | Chart | News | PowerRating -- Spectranetics, a company that manufactures and sells the excimer laser, has reported financial results for the quarter and nine months ended September 30.

According to the company, revenue for the third quarter of 2008 was $26.8 million, up 26 percent compared with revenue of $21.2 million for the third quarter of 2007. Disposable product revenue rose 28 percent to $22.1 million, laser revenue increased 21 percent to $2.4 million, and service and other revenue increased 18 percent to $2.3 million, all compared with the third quarter of 2007. The increase in disposable product revenue was comprised of a 19 percent increase in vascular intervention (VI) product sales and a 49 percent increase in lead management revenue, compared with the prior-year third quarter.

The worldwide installed base of lasers increased to 825 as of September 30, (657 in the United States), which included net laser placements of 25 units in the third quarter of 2008, compared with 20 net placements in the third quarter of 2007.

Pre-tax income for the third quarter of 2008 was $615,000, compared with pre-tax income of $844,000 for the third quarter of 2007. Pre-tax income during the third quarter of 2008 includes legal and other costs of $422,000 associated with the federal investigation announced on September 4. Given the Company's significant historical net operating losses that are available to offset future taxable income, any income tax expense or benefit is a non-cash item. As a result, management believes that pre-tax income or loss is the most appropriate measure of its operating performance.

For the third quarter of 2008, Spectranetics reported net income of $183,000, or $0.01 per diluted share, compared with net income of $231,000, or $0.01 per diluted share, in the third quarter of 2007.

"We continue to achieve strong revenue growth across our business in a challenging economic and competitive environment. This success reflects the differentiated value of our laser technology in treating peripheral artery disease, and the outstanding performance from our market-leading lead management products," said Emile J. Geisenheimer, Chairman, President and Chief Executive Officer. "Our results in the third quarter also demonstrate that we are conducting business in a normal course despite the federal investigation announced in September. Despite the distraction associated with the investigation, September remained our strongest month of the quarter in terms of revenue.

"We are cooperating fully with all aspects of the investigation, including working closely with the FDA to provide all information associated with the laser interaction with stents. Our testing in this area was comprehensive and we believe the data supports the safety of our laser technology in this application," said Geisenheimer.

Cash, cash equivalents and current and non-current investment securities totaled $44.1 million as of September 30, compared with $54.4 million as of December 31, 2007. During the second quarter of 2008, the Company paid $10.0 million to Kensey Nash upon closing of the acquisition of Kensey Nash's endovascular business. The Company currently holds $15.9 million of auction rate securities within its non-current investment securities, including a temporary impairment write-down of $1.8 million recorded during the quarter based on a preliminary analysis performed by a third party with expertise in valuation of these securities. This temporary impairment has been recorded within other comprehensive loss and did not impact the calculation of earnings per share during the quarter. A further adjustment will be recorded, if required, based on completion of the analysis.

Year-to-Date Financial Results

Revenue for the nine months of 2008 rose 31 percent to $77.4 million, from $59.0 million for the first nine months of 2007. Year-to-date 2008 disposable product revenue was $64.4 million, up 31 percent compared with disposable product revenue of $49.0 million in the first nine months of 2007, and laser revenue was up 51 percent to $6.3 million, from $4.2 million in the first nine months of 2007. Service and other revenue for the first nine months of 2008 was $6.7 million, up 16 percent compared with service and other revenue of $5.8 million for the comparable period in 2007.

The pre-tax loss for the first nine months of 2008 was $3.5 million, inclusive of the $3.8 million in-process research and development costs recorded in connection with the acquisition of certain product lines from Kensey Nash during the second quarter of 2008 and $422,000 of costs associated with the federal investigation, which compares with pre-tax income of $2.0 million in the first nine months of 2007. The net loss for the first nine months of 2008 was $2.9 million, or $0.09 per share, inclusive of after-tax IPR&D costs of $2.4 million, or $0.08 per share, compared with net income of $7.3 million, or $0.22 per diluted share, in the first nine months of 2007. Net income for the first nine months of 2007 included a $6.6 million income tax benefit associated with establishing a deferred tax asset for the estimated amount of net operating losses expected to be offset with future taxable income.

2008 Financial Guidance

The Company expects revenue for 2008 to be within the range of $105 million to $106 million, representing 27 percent to 28 percent growth compared with 2007. This compares with prior guidance of $104 million to $110 million.

Pre-tax loss for 2008 is expected to be within the range of a $3.4 - $4.5 million loss, including the $3.8 million of IPR&D costs recorded during the second quarter and costs associated with the ongoing federal investigation in the range of $1.5 - $2.0 million. Excluding these costs, the updated guidance for pre-tax income is in the range of $1.3 million to $1.9 million. This compares with prior guidance of $1.0 to $5.0 million, excluding the $3.8 million of IPR&D costs recorded during the second quarter. Management believes that excluding IPR&D costs and the legal and other costs associated with the federal investigation from our guidance for pre-tax results for 2008 facilitates comparison of our forecasted results of operations with previous guidance that did not include these costs as well as the financial results of other companies that do not include costs of this nature. The Company believes that pre-tax income is the most relevant measure of its operating performance given that income taxes are a non-cash expense due to historical net operating losses available to offset future taxable income. For that reason and the fact that significant fluctuations in the effective income tax rate are expected from quarter to quarter, the Company is not providing guidance on net income.

In assessing the Company's financial guidance, Spectranetics' management considered many factors and assumptions, including, but not limited to, current and projected sales trend data; status, timing and progression of the Company's product development projects; current and projected spending levels to support sales, marketing, development and administrative activities; anticipated timing and costs associated with the relocation and consolidation of its headquarters and manufacturing operation; and other risk factors discussed in Spectranetics' publicly filed documents.

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