Company Achieves Record $12.9 Million Revenue FREMONT, Calif., Nov.
7 /PRNewswire-FirstCall/ -- RITA Medical Systems, Inc.
(NASDAQ:RITA), a publicly-traded medical device company focused
solely on cancer therapies, today reported financial results for
the third quarter ended September 30, 2006. Highlights -- Launched
and immediately achieved volume shipments of the new LC Bead(TM)
product in the U.S. during the third quarter 2006 -- In October
began clinical feasibility study of the new Assure(TM) RFA
electrode device designed to treat breast cancer in conjunction
with breast conserving lumpectomy procedure -- In October received
FDA clearance for Habib 4X Laparoscopic(TM) resection device with
product shipments expected to begin late in the fourth quarter 2006
-- Achieved positive EBITDA (excluding non-cash SFAS123R expenses)
of $705,000 in the third quarter of 2006 and $666,000 year to date
-- Achieved positive cash flow and positive cash flow from
operations in the third quarter of 2006 and year-to-date 2006 --
Increased cash and cash equivalents balance at September 30, 2006
to $6.4 million from $5.5 million at December 31, 2006, and doubled
the cash and equivalents balance in one year from $3.2 million at
September 30, 2005 Revenue was $12.9 million for the third quarter
ended September 30, 2006, compared to revenue of $11.2 million in
the third quarter of 2005, a 15% year over year increase. This
compares sequentially to revenue of $12.8 million in the second
quarter of 2006. The year over year increase was led by significant
growth of the Habib 4X(TM) resection device and the commencement of
volume sales of the new LC Bead(TM) products in the third quarter,
together with the initiation of direct sales in several key
European markets in late 2005, rather than through distributors in
those markets. The GAAP net loss for the third quarter of 2006 was
$928,000, or a GAAP net loss per share of $0.02, a significant
improvement from the GAAP net loss in the second quarter of 2006 of
$1.6 million or a GAAP net loss per share of $0.04. The GAAP net
loss for the third quarter of 2005 was $705,000 or a GAAP net loss
per share of $0.02. The third quarter and second quarter 2006 GAAP
net losses included SFAS 123R stock compensation expenses of
$672,000 and $782,000, respectively, which were due to the
Company's adoption of SFAS 123R on January 1, 2006. However, the
comparable 2005 losses excluded any impact from the Company's
adoption of SFAS 123R, which was only effective for periods
beginning on or after January 1, 2006. The pro-forma net income for
the third quarter of 2006 was $111,000, or a pro-forma net income
per fully diluted share of $0.00, compared with a pro-forma net
loss in the third quarter of 2005 of $115,000 or a pro-forma net
loss per share of $0.00. The pro-forma net income and loss excludes
FASB 123R stock compensation expense and amortization expense of
acquisition intangibles. A reconciliation of the differences
between the GAAP net losses and the pro-forma net losses is
included in an accompanying table. For the first nine months of
2006 revenue was $38.2 million compared with revenue of $34.3
million for the first nine months of 2005, for 11.2% year over year
growth. The GAAP net loss for the first nine months of 2006 was
$4.5 million, or a GAAP net loss per share of $0.10, which included
SFAS 123R stock compensation expense of $2.2 million. The GAAP net
loss in the first nine months of 2005 was $3.8 million or a GAAP
net loss per share of $0.09. However, the GAAP net loss for the
first nine months of 2005 excluded any impact from the Company's
adoption of SFAS 123R, which was only effective for periods
beginning on or after January 1, 2006. Cash and cash equivalents
were $6.4 million at September 30, 2006, compared with $5.5 million
at December 31, 2005, and $3.2 million at September 30, 2005. The
increases were primarily due to stock option exercises by former
employees in the first quarter of 2006 and fourth quarter of 2005
and positive cash flow from operations for the nine month period
ended September 30, 2006. Cash flow from operations was positive
$875,000 during the first nine months ended September 30, 2006,
compared to a negative $3.4 million during the first nine months
ended September 30, 2005. "I am pleased with our results for the
quarter and for the first nine months of the year, and our outlook
for the remainder of 2006 is robust. We improved our cash position,
which doubled compared to one year ago, and made the investments in
R&D and products that we committed to at the start of the year.
We believe that this stronger financial position enables us to
continue to be aggressive in our new product development endeavors.
The increase we have seen in our localized therapy product sales is
positive affirmation of our strategy to offer our customers a full
continuum of cancer care solutions for their patients," said Mr.
Joseph DeVivo, President and CEO of RITA. "We have analyzed the
year over year decline in our specialty access catheter (SAC)
product line and believe we can reverse the trend with a
combination of strategies, including re-focusing our sellers who
were engaged in a successful effort to launch the LC Bead product,
and through dedicated clinical marketing specialist activities. We
believe that we can reinvigorate this important part of the
business with our existing SAC product portfolio and the planned
introduction of new SAC products next year. "We look to continue
our success at executing our business plan in the fourth quarter of
the year with the anticipated completion of several exciting
product and clinical milestones. As we have previously mentioned,
we will introduce a laparoscopic version of our popular Habib
4x(TM) resection device late in the fourth quarter, ahead of our
earlier plan. Early laboratory experiences with a number of thought
leaders have been very positive and we believe that the product
will have wide appeal to surgeons. "In the second quarter of 2006
we announced the planned introduction of the Uniblate(TM)
radiofrequency electrode product. Uniblate will allow us to compete
more aggressively in specific segments of the ablation market and
we believe will increase our market share. In the fourth quarter we
intend to complete product development and file the necessary
regulatory submissions required for product launch. Depending on
the timing of the regulatory submission responses we will begin
initial clinical utilization of Uniblate in the fourth quarter but
do not anticipate volume sales and shipments of the product until
the first quarter of 2007. "We initiated clinical feasibility
trials of the Starburst Assure(TM) RFA electrode in October 2006.
The Assure device is designed exclusively for
radiofrequency-assisted lumpectomy for breast cancer. The first
clinical cases have been performed and the Assure electrode was
used to ablate the wall of the lumpectomy cavity of patients
undergoing breast conserving surgery. The lumpectomy cavity RFA is
performed during the original surgery at the time of the excision
of the primary tumor. The feasibility study is designed to assess
the potential of lumpectomy cavity RFA using the Assure device to
spare women the trauma associated with additional surgery when
close or inadequate margins are identified through pathology
examination following a lumpectomy procedure." Mr. DeVivo further
commented, "The Assure device is a novel RFA electrode designed
specifically for the breast by our research and development team
and the feasibility trial is the first step in our efforts to
commercialize this new device. The start of the trial is a very
important milestone for RITA and we are very grateful to Drs. Piga
and Cabula and the entire team who performed these first-ever
clinical cases. Our next milestone is to complete enrollment in
this study which we believe we can do on schedule. "Looking ahead
to 2007, we expect to continue our strong growth, leveraging our
business model to further improve operating results year over
year," concluded Mr. DeVivo. Outlook The current outlook ranges for
the fourth quarter ending December 31, 2006 are as follows: --
Revenue - $13.6 million to $14.2 million -- GAAP net loss -
$925,000 million to $1.55 million -- Stock compensation expense
included in the GAAP net loss range - $700,000 to $750,000 --
Pro-forma net income or loss (excluding stock compensation expense
and amortization expense of acquisition intangibles) - $125,000
income to $450,000 loss The current outlook ranges for the year
ending December 31, 2006 are as follows: -- Revenue - $51.8 million
to $52.4 million -- GAAP net loss - $5.4 million to $6.0 million --
Stock compensation expense included in the GAAP net loss range -
$2,850,000 to $2,900,000 -- Pro-forma net loss (excluding stock
compensation expense and amortization expense of acquisition
intangibles) - $1.1 million to $1.6 million Additional details
pertaining to outlook for the fourth quarter of 2006 and full year
2006 are included in an accompanying table. Additionally, a
reconciliation of the differences between the outlook for the GAAP
net losses and the pro-forma net income or losses are included in
an accompanying table. Conference Call today RITA management will
host a conference call and webcast today, Tuesday, November 7,
2006, at 2 PM Pacific Time to discuss the Company's third quarter
results and its outlook for the remainder of 2006. The Company also
intends to provide some preliminary outlook information for 2007
during the call. The dial-in number for the conference call is
(800) 257-1927 for domestic callers and (303) 262-2075 for
international callers. A live audio webcast is available at the
Company's website http://www.ritamedical.com/ by clicking the
"audio webcast" link; no password is required to access the
webcast, although webcast participants are encouraged to go to the
site at least 15 minutes prior to the start of the call to
register, download and install any necessary audio software. An
audio replay of the conference call will also be available
beginning approximately one hour after the call's conclusion and
will remain available for 7 days. The audio replay can be accessed
by dialing (800) 405-2236 for domestic callers and (303) 590-3000
for international callers; the passcode for both is 11073387#. An
online replay of the audio webcast will be available for one year
immediately following the broadcast by accessing the same link on
our website. Information regarding the Company's sales by product
line and region for the periods ended September 30, 2006 and 2005
is presented in an accompanying table. Any additional financial and
other statistical information discussed during the call can be
accessed by listening to the audio replay as described above or
from the accompanying tables. Use of Non-GAAP Financial Measures
The Company uses, and this press release contains and the related
conference call will include, the non-GAAP metrics of pro-forma net
loss and EBITDA for the periods ended September 30, 2006 and 2005,
and pro-forma net loss outlook for the quarter and year ended
December 31, 2006. The calculations of pro-forma net loss and
EBITDA (earnings before interest, taxes, depreciation and
amortization, and also excluding FASB 123R stock compensation
expense, collectively "EBITDA") have no basis in GAAP. The Company
believes that all of these non-GAAP financial measures provide
useful information to investors, permitting a better evaluation of
the Company's ongoing and underlying business performance,
including the evaluation of its performance against its competitors
in the healthcare industry. A complete reconciliation of these
non-GAAP financial measures for historical periods to the most
directly comparable GAAP measures is presented in the accompanying
tables. Additionally, a reconciliation between the GAAP net loss
and the pro- forma net loss for the Company's outlook for the
quarter and the year ending December 31, 2006 is included in an
accompanying table. About RITA Medical Systems, Inc. RITA Medical
Systems develops, manufactures and markets innovative products that
provide local oncology therapy options for cancer patients
including radiofrequency ablation (RFA) systems and embolization
products for treating cancerous tumors as well as percutaneous
vascular and spinal access systems for systemic treatments. The
Company's oncology product lines include implantable ports, some of
which feature its proprietary Vortex(R) technology; tunneled
central venous catheters; and safety infusion sets and peripherally
inserted central catheters used primarily in cancer treatment
protocols. The Company's complete line of radiofrequency products
also includes the HABIB 4X resection device and will include the
new Laparoscopic Habib 4X resection device, both of which are
designed to coagulate highly vascularized tissue to facilitate a
fast dissection in order to minimize blood loss and blood
transfusion during surgery. The proprietary RITA RFA system uses
radiofrequency energy to heat tissue to a high enough temperature
to ablate it or cause cell death. In March 2000, RITA became the
first RFA company to receive specific FDA clearance for
unresectable liver lesions in addition to its previous general FDA
clearance for the ablation of soft tissue. In October 2002, RITA
again became the first company to receive specific FDA clearance,
this time for the palliation of pain associated with metastatic
lesions involving bone. The Company also distributes LC Bead
embolic microspheres in the United States. The LC Bead microspheres
are injected into selected vessels to block the blood flow feeding
a tumor, causing it to shrink over time, and are often used in
combination with RFA. The RITA Medical Systems website is at
http://www.ritamedical.com/. The statements in this news release
related to the use of the Company's technology and the Company's
future financial and operating performance, including without
limitation the Company's outlook for its financial results for the
quarter and the year ending December 31, 2006; the Company's
ability to timely develop, obtain regulatory approval, and
introduce new radiofrequency and vascular access products,
including the Laparoscopic Habib 4X, Uniblate, and Assure products;
physician adoption of the Company's products for treatment of types
of cancer other than liver and bone cancers, including breast
cancer; the Company's ability to achieve its revenue goals,
including its ability to improve revenue growth by selling directly
in certain European markets; the Company's ability to market and
sell the LC Bead product; the Company's ability to achieve
profitability; and the Company's ability to achieve future
improvements in operating performance, are forward- looking
statements involving risks and uncertainties that could cause
actual results to differ materially from those in such
forward-looking statements. Such risks and uncertainties include
but are not limited to: the Company's 2004 material weaknesses in
its internal control over financial reporting which were reported
in its Annual Report on Form 10K for the year ended December 31,
2004; the timing of product introductions or modifications,
including delays caused by technical or regulatory issues; the
Company's limited experience selling directly in certain European
markets; the Company's limited experience in manufacturing its
products in substantial quantities and its reliance on one or two
suppliers for several of its products, including Habib 4X; the
Company's lack of experience distributing the LC Bead product and
its ability to meet its minimum LC Bead purchase requirements; the
Company's historical and future operating results and its lack of
profitability; market acceptance of the Company's products for
existing or new indications; the Company's dependence on
international sales; competitive pressures; the ability of users of
the Company's products to receive reimbursement from third-party
payors, governmental programs or private insurance plans; product
liability or other patient-related claims, defects, recalls or
failures; and general economic and political conditions.
Information regarding these and other risks and uncertainties is
included in the Company's filings with the Securities and Exchange
Commission. RITA MEDICAL SYSTEMS, INC. CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (In thousands, except per share data,
unaudited) Three Months Ended Nine Months Ended September 30,
September 30, 2006 2005 2006 2005 Sales $12,905 $11,191 $38,224
$34,351 Cost of goods sold* 4,613 4,522 14,328 13,950 Gross profit
8,292 6,669 23,896 20,401 Operating expenses: Research and
development* 1,363 894 4,049 2,932 Selling, general and
administrative* 7,758 6,299 23,779 20,482 Restructuring charges --
-- -- 60 Total operating expenses 9,121 7,193 27,828 23,474 Loss
from operations (829) (524) (3,932) (3,073) Interest expense (179)
(206) (526) (704) Interest income and (other expense), net 80 25 20
(3) Net loss $(928) $(705) $(4,438) $(3,780) Net loss per common
share, basic and diluted $(0.02) $(0.02) $(0.10) $(0.09) Shares
used in computing net loss per common share, basic and diluted
43,227 41,794 43,143 41,601 * Figures presented include the
following amounts of stock compensation expense: Cost of goods sold
$35 $-- $108 $-- Research and development expense 129 -- 341 --
Selling, general and administrative expense: Option and ESPP
valuation 508 51 1,702 85 Total stock compensation expense $672 $51
$2,151 $85 RITA MEDICAL SYSTEMS, INC. CONDENSED CONSOLIDATED
BALANCE SHEETS (In thousands, unaudited) September 30, December 31,
2006 2005 Assets Current assets: Cash and cash equivalents $6,434
$5,522 Accounts and note receivable, net 7,442 7,264 Inventories
5,703 5,380 Prepaid assets and other current assets 1,149 941 Total
current assets 20,728 19,107 Long term note receivable, net -- 58
Property and equipment, net 1,724 1,959 Goodwill 91,339 91,339
Intangible assets 21,878 23,502 Other assets 420 502 Total assets
$136,089 $136,467 Liabilities and stockholders' equity Current
liabilities: Accounts payable and accrued liabilities $6,174 $5,397
Current portion of long term debt -- 113 Total current liabilities
6,174 5,510 Long term liabilities 9,772 9,762 Stockholders' equity
120,143 121,195 Total liabilities and stockholders' equity $136,089
$136,467 RITA MEDICAL SYSTEMS, INC. SALES BY REGION AND PRODUCT
LINE (In thousands, unaudited) Three Months Ended Nine Months Ended
September 30, September 30, 2006 2005 2006 2005 Domestic Sales
Localized therapy products* $5,635 $3,685 $15,123 $11,178 Specialty
Access Catheter Products 5,146 5,923 16,239 17,817 Total 10,781
9,608 31,362 28,995 International Sales Localized therapy products*
1,633 1,029 5,157 3,226 Specialty Access Catheter Products 491 554
1,705 2,130 Total 2,124 1,583 6,862 5,356 Total Sales Localized
therapy products* 7,268 4,714 20,280 14,404 Specialty Access
Catheter Products 5,637 6,477 17,944 19,947 Total $12,905 $11,191
$38,224 $34,351 * Localized therapy products include RF products,
consisting of radiofrequency ablation (RFA) and radiofrequency
resection products such as the HABIB 4X(TM) device, and the LC Bead
embolization products. RITA MEDICAL SYSTEMS, INC. PRO FORMA
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands,
except per share data, unaudited) Three Months Ended Nine Months
Ended September 30, September 30, 2006 2005 2006 2005 Sales $12,905
$11,191 $38,224 $34,351 Cost of goods sold 4,519 4,378 14,044
13,519 Gross profit 8,386 6,813 24,180 20,832 Operating expenses:
Research and development 1,234 894 3,708 2,932 Selling, general and
administrative 6,942 5,853 21,153 19,211 Restructuring charges --
-- -- 60 Total operating expenses 8,176 6,747 24,861 22,203 Loss
from operations 210 66 (681) (1,371) Interest expense (179) (206)
(526) (704) Interest income and (other expense), net 80 25 20 (3)
Pro-forma Net Income (Loss) $111 $(115) $(1,187) $(2,078) Pro-forma
Net Income (Loss) per common share, $0.00 $(0.00) $(0.02) $(0.04)
basic and diluted Reconciliation of Actual GAAP Net Loss to
Non-GAAP Pro Forma Net Loss (in $000) Three Months Ended Nine
Months Ended September 30, September 30, 2006 2005 2006 2005 GAAP
Net Income (Loss) $(928) $(705) $(4,438) $(3,780) Add: Stock
Compensation: Option and ESPP valuation Cost of Goods 35 -- 108 --
Research and Development 129 -- 341 -- Selling, General and
Administrative 508 51 1,702 85 Total Stock Compensation 672 51
2,151 85 Sub-total GAAP Net Loss excluding $(256) $(654) $(2,287)
$(3,695) stock compensation expense Add: Amortization of
Acquisition Intangibles Cost of Goods 59 144 176 431 Research and
Development -- -- -- -- Selling, General and Administrative 308 395
924 1,186 Total Amort. Of Acquisition Intangibles 367 539 1,100
1,617 Non-GAAP Pro Forma Net Income (Loss) $111 $(115) $(1,187)
$(2,078) Reconciliation of GAAP Loss to Earnings before Interest,
Taxes, Depreciation, Amortization and Stock Compensation Expense
(in $000) ("EBITDA") Three Months Ended Nine Months Ended September
30, September 30, 2006 2005 2006 2005 GAAP Net Loss $(928) $(705)
$(4,438) $(3,780) Add: Depreciation 307 319 984 817 Add:
Amortization Acquisition Intangibles 367 539 1,100 1,617 Other
Intangibles 174 173 524 505 Add: Interest Expense 179 206 526 704
Deduct: Interest Income (66) (28) (181) (115) Sub-total $33 $504
$(1,485) $(252) Add: Stock Compensation Expense re: Option and ESPP
valuation (FAS123R in 2006) 672 51 2,151 85 EBITDA (without Stock
compensation expense) $705 $555 $666 $(167) Outlook Ranges -
Reconciliation of GAAP Net Loss to Non-GAAP Pro Forma Net Loss (in
$000) Three Months Ended Twelve Months Ended December 31, 2006
December 31, 2006 GAAP Net Loss $(925) to $(1,550) $(5,350) to
$(6,000) Add: Stock Compensation Expense 700 to 750 2,850 to 2,900
Sub-total GAAP Net Loss excluding $(225) to $(800) $(2,500) to
$(3,100) stock compensation expense Add: Amortization of
Acquisition Intangibles 350 to 350 1,500 to 1,500 Pro-forma Net
Loss $125 to $(450) $(1,000) to $(1,600) Outlook Ranges -
Additional Details (Dollars in $000) Revenue $13,600 to $14,200
$51,800 to $52,400 Gross Profit Percentage 61.0% to 62.5% 62.0% to
62.5% R&D; SG&A Expenses $8,900 to $9,100 $34,500 to
$34,700 (excluding FASB 123R stock compensation expense) Other
Expense, primarily interest $200 to $200 $800 to $800 FASB 123R
Stock Compensation Expense $700 to $750 $2,850 to $2,900 GAAP Net
Loss (including FASB 123R) $(925) to $(1,550) $(5,350) to $(6,000)
Pro-forma Net Loss $125 to $(450) $(1,000) to $(1,600) (excluding
FASB 123R and amortization of acquisition related intangibles)
DATASOURCE: RITA Medical Systems, Inc. CONTACT: Joseph DeVivo,
President and CEO of RITA Medical Systems, Inc., +1-510-771-0400;
or Investors, Doug Sherk, , or Jenifer Kirtland, or ,
+1-415-896-6820, or Media, Steve DiMattia, +1-646-277-8706, or ,
all of EVC Group, for RITA Web site: http://www.ritamedical.com/
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