Advanced Neuromodulation Systems Reports Record Fourth Quarter and
2004 Results 2004 Neuro Sales Increased 36% DALLAS, Feb. 17
/PRNewswire-FirstCall/ -- Advanced Neuromodulation Systems, Inc.
(NASDAQ:ANSI) (ANS) today announced record revenue and net income
for the fourth quarter and 2004, provided updates on its clinical
and product development programs, reaffirmed its previous revenue
guidance for fiscal 2005, and announced other developments. Fourth
Quarter Results For the three months ended December 31, 2004,
revenue increased 26% to a record $32,293,000 from $25,668,000 for
the fourth quarter of 2003. Sales of neuro products increased 23%
to a record $28,782,000 for the fourth quarter of 2004 from
$23,413,000 a year earlier, as sales of ANS' Genesis(R) and
GenesisXP(TM) implantable spinal cord stimulation (SCS) systems and
its Renew(R) radio frequency (RF) SCS system for the treatment of
chronic pain continued to meet management's expectations. Gross
margin increased to 74.2% from 73.4%. Net income for this year's
fourth quarter increased 38% to a record $5,133,000, or $0.24 per
diluted share. This compares to net income for the fourth quarter
of 2003 of $3,721,000, or $0.18 per diluted share. Costs associated
with a vendor supply issue at its HDI operation in the fourth
quarter of 2004, which have now been resolved, reduced net income
for the period by approximately $0.01 per diluted share. Twelve
Month Results For the twelve months ended December 31, 2004,
revenue increased 33% to a record $120,744,000 from $91,082,000 for
2003. Neuro sales increased 36% to a record $108,866,000 for 2004
from $80,001,000 for 2003. Gross margin increased to 73.4% from
70.2%. Net income for 2004 increased 37% to a record $18,167,000,
or $0.86 per diluted share. This compares to net income for 2003 of
$13,217,000, or $0.64 per diluted share. Net income for 2003
included other income of $969,000 pre-tax, or $0.03 per diluted
share after tax, from the reversal of an accrued tax abatement
liability. Second Generation Rechargeable Product Update ANS
recently filed a PMA supplement with the FDA for approval to market
and sell its second generation rechargeable SCS systems. "We hope
to receive approval for our second generation rechargeable IPGs
sometime during the second quarter of 2005," said Chief Executive
Officer Chris Chavez. Noting that ANS received FDA approval to
market and sell its first generation rechargeable SCS systems in
the fourth quarter of 2004, Chavez added, "Pain practitioners want
the flexibility to apply the right system to the right indication
-- one size does not fit all. ANS is the only company in the world
that today offers a full array of spinal cord stimulation devices,
including radio-frequency (RF), conventional IPGs, and rechargeable
IPGs. We will continue to broaden and strengthen our intellectual
property portfolio to support our long-term growth objectives." ANS
currently has 59 issued patents and 111 patents pending. New
Indications Update "The neuromodulation market is expected to
surpass the billion dollar milestone this year, and promises to
become a multi-billion dollar, multi- indication segment of the
medical device industry. While we continue to focus on aggressively
developing the SCS market for chronic pain, we simultaneously are
investing in the creation of platform technologies and
organizational capabilities that are readily leverageable into
emerging clinical applications for neuromodulation, applications
that we believe will fuel strong organic growth for years to come.
Currently, we are systematically incubating such promising new
indications as Parkinson's, Tremor, Migraine, Depression, Pelvic
Pain, Obesity, Tinnitus, Traumatic Brain Injury and others," Chavez
said. Chavez announced that ANS has received approval from the FDA
to expand its feasibility study to a pivotal study of
neurostimulation for the treatment of migraine headache. "We expect
the results of this pivotal trial to support a future PMA
submission for chronic headache. We believe that this application
has significant clinical potential," Chavez said. Chavez added that
ANS recently amended its Investigational Device Exemption (IDE)
submission to the FDA and hopes to begin trials in the next few
months of its Deep Brain Stimulation (DBS) system for the treatment
of Essential Tremor. He said that ANS hopes to amend its IDE
submission for DBS for the treatment of Parkinson's disease in the
first quarter of 2005 and hopes to begin clinical trials in the
second quarter of 2005. In addition, he said the company has
submitted an IDE application with the FDA for a second pilot study
on sacral nerve stimulation, which ANS hopes to begin in the second
quarter of 2005. Cyberonics Investment With respect to its
investment in Cyberonics, Chavez reported that ANS has sold
approximately half, or 1,757,000 of the 3.5 million shares of the
Cyberonics stock it purchased last summer, for a pre-tax profit of
approximately $43.3 million. ANS bought 3.5 million shares last
August at an average cost per share of $14.29, and continues to
hold 1,743,000 shares. "We continue to believe that a business
combination of ANS and Cyberonics could create significant
operating synergies. The substantial increase in Cyberonics' stock
price following the FDA's decision regarding VNS therapy, coupled
with Cyberonics' Board's decision not to engage in a discussion
with ANS, however, prompted us to decide to sell some of our
shares. ANS may elect to sell additional shares or hold them for
investment purposes. We are pleased that our investment has been
profitable for our shareholders and has considerably increased our
cash position. We also think the FDA's decision on VNS therapy for
TRD is a major step forward in the development of neurostimulation
as a treatment for this important indication, which could
ultimately benefit ANS as we pursue a depression indication," he
said. Inspector General ANS also reported that it has received a
subpoena from the Inspector General, Department of Health and Human
Services, requesting documents related to certain of the Company's
sales and marketing, reimbursement, Medicare and Medicaid billing,
and certain other business practices. "For some time now, the
Inspector General has publicly stated that pharmaceutical and
medical device companies would become the focus of increased
regulatory scrutiny. The Inspector General has investigated many
large and well-regarded companies, including certain of our
competitors, for their practices in these areas. ANS is committed
to conducting business at the highest ethical and legal standards,
and we are cooperating fully with the Inspector General's
investigation," Chavez said. Management Reaffirms Revenue Guidance
for 2005 and Comments on First Quarter Outlook Chavez said that
management continues to expect revenue for 2005 of approximately
$145 million, although early indications are that revenue for the
first quarter could be below previous expectations. With respect to
the earnings outlook for 2005, the CEO continued, "Obviously, net
income, earnings per share and our cash position will be
significantly and positively affected by the sizeable profit we
could recognize on our investment in Cyberonics. We have decided to
use this opportunity to accelerate our pursuit of new indications
for our technology more aggressively, by accelerating clinical
studies, regulatory approval efforts and product development. While
we will remain focused on profitable bottom-line performance and
growth in our core pain business, we expect to increase our
investment in clinical studies, regulatory and R&D by as much
as $5 million. In addition, the new FASB rules on expensing stock
options will begin to affect ANS in June 2005. We currently are
assessing the likely impact of these factors, and plan to update
our guidance for net income and EPS on our conference call for the
first quarter of 2005." Stock Repurchase Program Chavez noted that
ANS' Board of Directors previously approved the repurchase of up to
1,000,000 shares of the Company's common stock, and that the
Company may elect to apply a portion of the proceeds from the
Cyberonics stock sales to this repurchase program. To date, no
shares have been repurchased under the plan. Repurchases may be
made from time to time in open market or privately negotiated
transactions, subject to price and availability, and financed out
of working capital. "Our Board believes that ANS common stock is an
attractive investment, and repurchasing shares is a sound use of
working capital under the right circumstances," he explained. ANS
currently has about 20.4 million issued and outstanding shares. At
December 31, 2004, prior to any sales of Cyberonics stock, ANS had
total cash and marketable securities of approximately $124 million.
ANS has no debt. Conference Call ANS has scheduled a conference
call today at 11:00 a.m. EST. The simultaneous webcast is available
at http://www.ans-medical.com/investors . A replay will be
available at this same Internet address, or at (800) 633-8284,
reservation #21231267, after 1:00 p.m. EST. About Advanced
Neuromodulation Systems Advanced Neuromodulation Systems designs,
develops, manufactures and markets implantable systems used to
manage chronic intractable pain and other disorders of the central
nervous system. Fortune magazine recently ranked ANS as the 8th
fastest growing small company in its annual list of the Top 200
Fastest Growing Small Companies in the United States. Forbes
magazine recently recognized ANS as one of America's 200 Best Small
Companies. Frost & Sullivan, an international strategic market
research firm, also recently presented ANS with its Product
Innovation Award, recognizing ANS as the technology innovation
leader in the neurostimulation market and ANS' Genesis(R)
Implantable Pulse Generator system as the most advanced fully
implantable spinal cord stimulator on the market. Additional
information is available at http://www.ans-medical.com/ . "Safe
harbor" statement under the Private Securities Litigation Reform
Act of 1995: Statements contained in this document that are not
based on historical facts are "forward-looking statements." Terms
such as "plan," "should," "would," "anticipate," "believe,"
"intend," "estimate," "expect," "predict," "scheduled," "new
market," "potential market applications" and similar expressions
are intended to identify forward-looking statements. Such
statements are by nature subject to uncertainties and risks,
including but not limited to: the launch of new competitive
products by Medtronic, Advanced Bionics/Boston Scientific or
others, as well as other market factors, that could impede growth
in or reduce sales of our IPG and RF systems, which could adversely
affect our revenues and profitability; continued market acceptance
of the Genesis(R) IPG and GenesisXP(TM) IPG; competition from
Medtronic, Advanced Bionics/Boston Scientific and future
competitors; continued market acceptance of our Renew(R) system;
the risk of adverse changes in the value or marketability of
Cyberonics securities that the Company owns; Cyberonics growth
potential and future prospects; patient or physician selection of
less invasive or less expensive alternatives; adverse changes in
coverage or reimbursement amounts by Medicare, Medicaid, private
insurers, managed care organizations or workers' comp programs;
intellectual property protection and potential infringement issues;
the cost, uncertainty and other risks inherent in our intellectual
property litigation against Advanced Bionics; obtaining necessary
government approvals for our rechargeable IPGs and other new
products or applications and maintaining compliance with FDA
product and manufacturing requirements; product liability; reliance
on single suppliers for certain components; completion of research
and development projects in an efficient and timely manner; the
satisfactory completion of clinical trials and/or market tests
prior to the introduction of new products; successful integration
of acquired businesses, products and technologies; the cost,
uncertainty and other risks inherent in patent and intellectual
property litigation; international trade risks; and other risks
detailed from time to time in the Company's SEC filings.
Consequently, if such management assumptions prove to be incorrect
or such risks or uncertainties materialize, anticipated results
could differ materially from those forecast in forward- looking
statements. Such forward-looking statements speak only as of the
date on which they are made and the company does not undertake any
obligation to update any forward-looking statement to reflect
events or circumstances after the date of this release. ADVANCED
NEUROMODULATION SYSTEMS, INC. and SUBSIDIARIES Condensed
Consolidated Statements of Income (Unaudited) Three Months Ended
Twelve Months Ended December 31, December 31, 2004 2003 2004 2003
Net revenue $32,292,529 $25,668,412 $120,743,651 $91,081,969 Cost
of revenue 8,342,204 6,817,905 32,093,221 27,135,320 Gross profit
23,950,325 18,850,507 88,650,430 63,946,649 Operating expenses:
Sales and marketing 10,087,949 8,091,880 37,898,560 26,552,873
Research and development 2,654,973 2,927,561 10,751,281 9,525,411
General and administrative 3,175,608 2,124,043 11,173,924 7,628,127
Amortization of intangibles 634,592 553,551 2,459,430 1,831,644
16,553,122 13,697,035 62,283,195 45,538,055 Income from operations
7,397,203 5,153,472 26,367,235 18,408,594 Other income (expense):
Foreign currency transaction gain 155,932 --- 182,088 --- Other
income --- 5,642 --- 974,846 Investment income 180,360 218,948
1,144,381 995,318 336,292 224,590 1,326,469 1,970,164 Income before
income taxes 7,733,495 5,378,062 27,693,704 20,378,758 Income taxes
2,600,590 1,656,589 9,526,841 7,161,504 Net income $5,132,905
$3,721,473 $18,166,863 $13,217,254 Basic income per share: Net
income $0.25 $0.19 $0.90 $0.69 Number of basic shares 20,277,090
19,599,846 20,125,690 19,180,041 Diluted income per share: Net
income $0.24 $0.18 $0.86 $0.64 Number of diluted shares 21,211,987
21,035,493 21,140,548 20,589,887 ADVANCED NEUROMODULATION SYSTEMS,
INC. and SUBSIDIARIES Condensed Consolidated Balance Sheets
(Unaudited) December 31, December 31, 2004 2003 Assets Current
assets: Cash and marketable securities $124,016,064 $94,802,122
Receivable, trade net 25,322,813 17,892,416 Receivable, interest
and other 638,987 259,687 Inventories 23,923,851 22,113,159
Deferred income taxes 2,029,091 1,423,228 Income taxes receivable
--- 1,324,001 Prepaid expenses and other current assets 1,888,957
1,007,244 Total current assets 177,819,763 138,821,857 Net
property, equipment and fixtures 33,175,329 21,150,010 Minority
equity investments in preferred stock 1,104,000 1,104,000 Goodwill,
patents, trademarks, purchased technology & other assets, net
35,388,049 33,730,420 Total assets $247,487,141 $194,806,287
Liabilities and Stockholders' Equity Current liabilities: Accounts
payable $3,206,516 $5,717,222 Accrued salary and employee benefit
costs 2,390,721 4,045,361 Accrued commissions 2,656,112 1,424,471
Income taxes payable 708,412 --- Deferred revenue 165,861 503,093
Other accrued expenses 342,075 694,449 Total current liabilities
9,469,697 12,384,596 Deferred income taxes 14,734,487 3,389,255
Non-current deferred revenue 718,820 907,513 Total stockholders'
equity 222,564,137 178,124,923 Total liabilities and stockholders'
equity $247,487,141 $194,806,287 DATASOURCE: Advanced
Neuromodulation Systems, Inc. CONTACT: Neil Berkman Associates,
+1-310-277-5162, or , for Advanced Neuromodulation Systems, Inc.;
or Chris Chavez, President & CEO of Advanced Neuromodulation
Systems, Inc., +1-972-309-8000 Web site:
http://www.ans-medical.com/
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