Company Achieves a Record $12.5 Million in Revenue and Also Reduces
Operating Loss; Generates Positive Cash Flow From Operations
FREMONT, Calif., May 9 /PRNewswire-FirstCall/ -- RITA Medical
Systems, Inc. (NASDAQ:RITA), a publicly-traded medical device
company focused solely on cancer therapies, today reported solid
financial results for the first quarter ended March 31, 2006.
Highlights -- Achieved record quarterly revenue for the second
consecutive quarter -- Generated $539,000 positive cash flow from
operations -- Completed first full quarter of direct selling in the
UK, France and Germany resulting in strong sequential and year over
year international sales growth -- Expanded market position with
our HABIB 4X(TM) resection product -- Development of laparoscopic
HABIB resection device and ASSURE(TM) product for radiofrequency
ablation-assisted breast lumpectomy remained on schedule --
Acquired exclusive distribution rights in the US and Canada for the
LC Bead(TM) embolization product from Biocompatibles International
plc -- In a March 2006 press release The Society of Interventional
Radiology highlighted three-year clinical data with higher survival
rates documented for selected primary liver cancer patients who had
radiofrequency ablation (RFA) treatment compared to those who had
surgical resection -- CIGNA Corporation published written policy to
reimburse for RFA in certain lung cancer cases -- Completed ISO
13485:2003 Certification Revenue was $12.5 million for the first
quarter ended March 31, 2006, compared to revenue of $12.1 million
in the fourth quarter of 2005, and compared to revenue of $11.2
million in the first quarter of 2005. The GAAP net loss for the
first quarter of 2006 was $2.0 million, or a GAAP net loss per
fully diluted share of $0.05, compared with a GAAP net loss in the
fourth quarter of 2005 of $7.2 million or a GAAP net loss per fully
diluted share of $0.17, for a sequential improvement of $5.2
million or 72%. The GAAP net loss for the first quarter of 2005 was
$1.7 million or a GAAP net loss per fully diluted share of $0.04.
The pro-forma net loss for the first quarter of 2006 was $891,000,
or a pro-forma net loss per fully diluted share of $0.02, compared
with a pro-forma net loss in the fourth quarter of 2005 of $1.1
million or a pro-forma net loss per fully diluted share of $0.03.
The pro-forma net loss for the first quarter of 2005 was $1.1
million or a pro-forma net loss per fully diluted share of $0.03.
The pro-forma net 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 are included in an accompanying table.
Cash and cash equivalents were $6.7 million at March 31, 2006,
compared with $5.5 million at December 31, 2005. The increase was
primarily due to stock option exercises by former employees and
positive cash flow from operations. "We had a very good quarter,"
said Joseph DeVivo, President and Chief Executive Officer of RITA
Medical Systems. "We achieved record total quarterly revenue for
the second consecutive quarter, generated positive cash from
operations and reduced the operating loss while continuing to make
the increased investments in the new product developments that we
announced we would pursue earlier this year. Our move to establish
direct sales in Germany, France and the United Kingdom has
increased our international revenue growth and facilitated our
ability to continue to increase market share in these countries. In
addition, we increased the sales of our RF products sequentially
and by 43% as compared to the first quarter of last year, led by
the contribution of the HABIB 4X resection device. "We continue to
be on schedule in the development of the Assure product for
RFA-assisted breast lumpectomy as well as the laparoscopic HABIB
resection device," continued Mr. DeVivo. "Additionally, we recently
added the LC Bead embolization product to our portfolio with an
exclusive license in the US and Canada from Biocompatibles
International plc. We believe that this product is very synergistic
with our existing portfolio and sales call points, and is
validation of the power of our sales and marketing platform to
access the oncology market for future sales growth," concluded Mr.
DeVivo. Outlook The current outlook ranges for the second quarter
ending June 30, 2006 are as follows: -- Revenue -- $12.5 million to
$12.9 million -- GAAP net loss -- ($1.6) million to ($2.2) million
-- Stock compensation expense included in the GAAP net loss range
-- $700,000 to $800,000 -- Pro-forma net loss (excluding stock
compensation expense and amortization expense of acquisition
intangibles) -- ($530,000) to ($1,030,000) The current outlook
ranges for the year ending December 31, 2006 are as follows: --
Revenue -- $51 million to $54 million -- GAAP net loss -- ($4.3)
million to ($6.3) million -- Stock compensation expense included in
the GAAP net loss range -- $2,800,000 to $3,300,000 -- Pro-forma
net loss (excluding stock compensation expense and amortization
expense of acquisition intangibles) -- $0 to ($1,500,000)
Additional details pertaining to outlook for the second 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 losses are
included in an accompanying table. Conference Call today RITA
management will host a conference call and webcast today, Tuesday,
May 9, 2006, at 2 p.m. Pacific Time to discuss the Company's first
quarter results and its outlook for the remainder of 2006. The
dial-in number for the conference call is 800-240-5318 for domestic
participants and 303-262-2130 for international participants. 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 11058832#. An online replay of the audio webcast will
be available for one year immediately following the broadcast by
accessing the same link. Information regarding the Company's sales
by product line and region for the quarters ended March 31, 2006,
December 31, 2005 and March 31, 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 for the
quarters ended March 31, 2006, December 31, 2005 and March 31,
2005, and pro-forma net loss outlook for the quarter ended June 30,
2006 and year ended December 31, 2006. The calculation of pro-forma
net loss has no basis in GAAP. Additionally, the Company may use in
the conference call related to this press release the non-GAAP
metric earnings before interest, taxes, depreciation and
amortization, ("EBITDA") for the quarters ended March 31, 2006,
December 31, 2005 and March 31, 2005. Additionally, the calculation
of EBITDA in the accompanying table excludes the FASB 123R stock
compensation expense. Neither calculation of EBITDA has a 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 ending June 30, 2006 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 for cancer patients including
radiofrequency ablation (RFA) systems and embolization products for
treating cancerous tumors as well as percutaneous vascular and
spinal access systems. 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 radiofrequency product line also
includes the HABIB 4X resection device which coagulates a "surgical
resection plane" and is designed 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
and Canada. 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
radiofrequency ablation (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 financial results for the quarter ended
June 30, 2006; the 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 meet the Company's ability
to improve ASP, margin and revenue growth by selling direct in
certain European markets; its ability to continue sales growth of
its HABIB 4X product; the Company's ability to develop the Assure
product or any other product under development; the Company's
ability to market and sell the LC Bead product using its existing
sales force, including its ability to meet its minimum purchase
requirements and encourage physician adoption of the LC Bead
product; the Company's ability to achieve profitability, the
Company's ability to meet its future guidance, the Company's
ability to achieve future improvements in operating performance and
the market opportunity for the application of RFA to assist in the
treatment of breast cancer and of a laparoscopic HABIB device, 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 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 a sole
source supplier of the HABIB products; the Company's lack of
experience distributing the LC Bead product; the Company's
historical and future operating results and its lack of
profitability; the timing of product introductions or
modifications, including delays caused by technical or regulatory
issues; 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; 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 Three Months Ended
Ended March 31, December 31, 2006 2005 2005 Sales $12,519 $11,205
$12,090 Cost of goods sold* 4,861 4,805 5,769 Impairment of
intangible assets -- -- 3,595 Gross profit 7,658 6,400 2,726
Operating expenses: Research and development* 1,280 1,039 999
Selling, general and administrative* 8,213 6,768 6,799 Impairment
of intangible assets -- -- 1,947 Restructuring charges -- 60 --
Total operating expenses 9,493 7,867 9,745 Loss from operations
(1,835) (1,467) (7,019) Interest expense (172) (287) (182) Interest
income and (other expense), net 52 65 6 GAAP Net loss $(1,955)
$(1,689) $(7,195) GAAP Net loss per common share, basic and diluted
$(0.05) $(0.04) $(0.17) Shares used in computing net loss per
common share, basic and diluted 43,047 41,457 42,302 * Figures
presented include the following amounts of stock compensation
expense: Cost of goods sold $31 $-- $-- Research and development
expense 85 -- -- Selling, general and administrative expenses 581
-- 13 Total stock compensation expense $697 $-- $13 RITA MEDICAL
SYSTEMS, INC. PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (In thousands, except per share data, unaudited) Three
Months Three Months Ended Ended March 31, December 31, 2006 2005
2005 Sales $12,519 $11,205 $12,090 Cost of goods sold 4,771 4,661
5,625 Gross profit 7,748 6,544 6,465 Operating expenses: Research
and development 1,195 1,039 999 Selling, general and administrative
7,324 6,372 6,390 Restructuring charges -- 60 -- Total operating
expenses 8,519 7,471 7,389 Loss from operations (771) (927) (924)
Interest expense (172) (287) (182) Interest income and (other
expense), net 52 65 6 Pro-forma Net loss $(891) $(1,149) $(1,100)
Pro-forma Net loss per common share, basic and diluted $(0.02)
$(0.03) $(0.03) Shares used in computing net loss per common share,
basic and diluted 43,047 41,457 42,302 Reconciliation of Actual
GAAP Net Loss to Non-GAAP Pro Forma Net Loss (in $000) Three Months
Three Months Ended Ended March 31, December 31, 2006 2005 2005 GAAP
Net Loss $(1,955) $(1,689) $(7,195) Add: Impairment Charge -- --
5,542 Add: Stock Compensation 697 -- 13 Sub-total $(1,258) $(1,689)
$(1,640) Add: Amortization of Acquisition Intangibles 367 540 540
Non-GAAP Pro Forma Net Loss $(891) $(1,149) $(1,100) Reconciliation
of GAAP Loss to Earnings before Interest, Taxes, Depreciation,
Amortization and Stock Compensation Expense (in $000) ("EBITDA")
Three Months Three Months Ended Ended March 31, December 31, 2006
2005 2005 GAAP Net Loss $(1,955) $(1,689) $(7,195) Add:
Depreciation 347 255 408 Add: Amortization Acquisition Intangibles
367 540 540 Other Intangibles 174 175 174 Add: Impairment -- --
5,542 Add: Interest Expense 172 287 182 Add/(Deduct): Interest
Income net of other expense, primarily taxes (52) (65) (8)
Sub-total $(947) $(497) $(357) Add: Stock Compensation Expense 697
-- 13 EBITDA (without Stock compensation expense) $(250) $(497)
$(344) RITA MEDICAL SYSTEMS, INC. SALES BY REGION AND PRODUCT LINE
(In thousands, unaudited) Three Months Three Months Ended Ended
March 31, December 31, 2006 2005 2005 Domestic Sales Radiofrequency
Products $4,709 $3,602 $4,898 Specialty Access Catheter Products
5,435 6,047 5,451 Total 10,144 9,649 10,349 International Sales
Radiofrequency Products 1,767 927 1,181 Specialty Access Catheter
Products 608 629 560 Total 2,375 1,556 1,741 Total Sales
Radiofrequency Products 6,476 4,529 6,079 Specialty Access Catheter
Products 6,043 6,676 6,011 Total $12,519 $11,205 $12,090 RITA
MEDICAL SYSTEMS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In
thousands, unaudited) March 31, December 31, 2006 2005 Assets
Current assets: Cash and cash equivalents $6,748 $5,522 Marketable
securities -- -- Accounts and note receivable, net 7,287 7,264
Inventories 5,032 5,380 Prepaid assets and other current assets
1,207 940 Total current assets 20,274 19,106 Long term note
receivable, net 20 58 Property and equipment, net 1,852 1,960
Goodwill 91,339 91,339 Intangible assets 22,961 23,502 Other assets
475 502 Total assets $136,921 $136,467 Liabilities and
stockholders' equity Accounts payable and accrued liabilities
$6,220 $5,397 Current portion of long term debt -- 113 Total
current liabilities 6,220 5,510 Long term liabilities 9,778 9,762
Stockholders' equity 120,923 121,195 Total liabilities and
stockholders' equity $136,921 $136,467 Outlook Ranges -
Reconciliation of GAAP Net Loss to Non-GAAP Proforma Net Loss (in
$000) Three Months Ended Twelve Months Ended June 30, 2006 December
31, 2006 GAAP Net Loss $(1,600) to $(2,200) $(4,300) to $(6,300)
Add: Stock Compensation Expense 700 to 800 2,800 to 3,300 Sub-total
$(900) to $(1,400) $(1,500) to $(3,000) Add: Amortization of
Acquisition Intangibles 370 to 370 1,500 to 1,500 Pro-forma Net
Loss $(530) to $(1,030) $-- to $(1,500) Outlook Ranges - Additional
Details (Dollars in $000) Three Months Ended Twelve Months Ended
June 30, 2006 December 31, 2006 Revenue $12,500 to $12,900 $51,000
to $54,000 Gross Profit Percentage 61.0% to 62.5% 61.0% to 62.5%
R&D; SG&A Expenses $8,800 to $9,000 $34,500 to $35,500
(excluding FASB 123R stock compensation expense) Other Expense,
primarily interest $200 to $200 $800 to $800 FASB 123R Stock
Compensation Expense $700 to $800 $2,800 to $3,300 GAAP Net Loss
(including FASB 123R) $(1,600) to $(2,200) $(4,300) to $(6,300)
Pro-forma Net Loss $(530) to $(1,030) $-- to $(1,500) (excluding
FASB 123R and amortization of acquisition related intangibles)
DATASOURCE: RITA Medical Systems, Inc. CONTACT: investors, Doug
Sherk, , or Jennifer Beugelmans, both at +1-415-896-6820, or media,
Steve DiMattia, +1-646-277-8706, or , all of EVC Group, for RITA
Medical Systems, Inc.; or Joseph DeVivo, President and CEO of RITA
Medical Systems, Inc., +1-510-771-0400 Web site:
http://www.ritamedical.com/
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