Company Achieves Record $12.8 Million Revenue; Expects Key Product
Introductions in Second Half of Year FREMONT, Calif., Aug 8
/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 second quarter
ended June 30, 2006. Highlights -- Achieved record revenue for the
third consecutive quarter of $12.8 million. -- Delivered 23% sales
growth year to date in Localized Therapy products, which includes
radiofrequency ablation, Habib 4X(TM), and LC Beads(TM). -- Second
consecutive quarter of specialty access catheter revenue growth. --
Maintained cash position for the first half of 2006 while
continuing to make significant investments in new product
development programs. -- Acquired exclusive distribution rights to
LC Beads in the U.S. and Canada and began shipping product in the
second quarter. -- Moved Laparoscopic Habib 4X(TM) resection device
introduction from first quarter 2007 to fourth quarter 2006. --
Introduction of Uniblate(TM) RF electrode expected in fourth
quarter 2006. Revenue was $12.8 million for the quarter ended June
30, 2006, compared to revenue of $12.5 million in the first quarter
of 2006, and compared to revenue of $12.0 million in the second
quarter of 2005. The GAAP net loss for the second quarter of 2006
was $1.6 million, or a GAAP net loss per fully diluted share of
$0.04, compared with a GAAP net loss in the first quarter of 2006
of $2.0 million or a GAAP net loss per fully diluted share of
$0.05. The GAAP net loss for the second quarter of 2005 was $1.4
million or a GAAP net loss per fully diluted share of $0.03. The
pro-forma net loss for the second quarter of 2006 was $406,000, or
a pro-forma net loss per fully diluted share of $0.01, compared
with a pro-forma net loss in the first quarter of 2006 of $891,000
or a pro-forma net loss per fully diluted share of $0.02. 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 is included in an accompanying table. For
the first six months of 2006 revenue was $25.3 million compared
with revenue of $23.2 million for the first six months of 2005 for
9.3% year over year growth. The GAAP net loss for the first six
months of 2006 was $3.5 million, or a GAAP net loss per fully
diluted share of $0.08, compared with a GAAP net loss in the first
six months of 2005 of $3.1 million or a GAAP net loss per fully
diluted share of $0.07. Cash and cash equivalents were $5.9 million
at June 30, 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 for the six month
period ended June 30, 2006. "I am very pleased at our results for
the quarter and for the first half of the year. Strong sales in our
Localized Therapy product platform, which includes RFA, Habib and
now LC Beads, is a positive affirmation of our strategy to offer
our customers continuum of cancer care solutions for their
patients," said Mr. Joseph DeVivo, President and CEO of RITA. "The
second half of the year promises to be very exciting as we have
several product and clinical milestones we plan to deliver. We are
currently planning to introduce a laparoscopic version of our
popular Habib 4x resection device ahead of schedule. Early
laboratory experiences with several thought leaders have been very
positive and we believe that the product will have wide appeal to
surgeons." "In the fourth quarter this year we also plan to
introduce a single needle RF electrode that offers an adjustable
ablation size. The Uniblate(TM) product introduction is planned for
the fourth quarter this year and we expect it to add value to our
industry-leading RFA product line." "And finally, we plan to have
investigational Assure(TM) RF electrodes, which are designed
exclusively for radiofrequency-assisted lumpectomy for breast
cancer, available for use at two key clinical sites where
Investigative Review Board approval for the device has been
granted." "We believe that our strategic direction and our
continued tactical execution will deliver a successful second half
of 2006." Outlook The current outlook ranges for the third quarter
ending September 30, 2006 are as follows: -- Revenue -- $12.2
million to $12.7 million -- GAAP net loss -- ($2.1) million to
($2.7) million -- Stock compensation expense included in the GAAP
net loss range -- $800,000 to $850,000 -- Pro-forma net loss
(excluding stock compensation expense and amortization expense of
acquisition intangibles) -- ($950,000) to ($1,500,000) The expected
sequential decline in third quarter revenue reflects anticipated
normal summer seasonality. The current outlook ranges for the year
ending December 31, 2006 are as follows: -- Revenue -- $51.5
million to $53.5 million -- GAAP net loss -- ($5.3) million to
($7.3) 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) -- ($1) million to ($2.5) million
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,
August 8, 2006, at 2 PM Pacific Time to discuss the Company's
second quarter results and its outlook for the remainder of 2006.
The dial-in number for the conference call is 800-257-1836 for
domestic callers and 303-205-0066 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 11066571#. 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 periods ended June 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 June 30, 2006
and 2005, and pro-forma net loss outlook for the quarter ended
September 30, 2006 and year ended December 31, 2006. The
calculation 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 ending September 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.
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 outlook for its financial results for the
quarter ending September 30, 2006 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; 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 Six Months Ended June 30, June 30, 2006 2005 2006 2005
Sales $12,800 $11,955 $25,319 $23,160 Cost of goods sold* 4,854
4,623 9,715 9,428 Gross profit 7,946 7,332 15,604 13,732 Operating
expenses: Research and development* 1,406 999 2,686 2,038 Selling,
general and administrative* 7,808 7,415 16,021 14,183 Restructuring
charges -- -- -- 60 Total operating expenses 9,214 8,414 18,707
16,281 Loss from operations (1,268) (1,082) (3,103) (2,549)
Interest expense (175) (211) (347) (498) Interest income and (other
expense), net (112) (94) (60) (28) Net loss $(1,555) $(1,387)
$(3,510) $(3,075) Net loss per common share, basic and diluted
$(0.04) $(0.03) $(0.08) $(0.07) Shares used in computing net loss
per common share, basic and diluted 43,153 41,548 43,100 41,503 *
Figures presented include the following amounts of stock
compensation expense: Cost of goods sold $42 $-- $73 $-- Research
and development expense 127 -- 212 -- Selling, general and
administrative expense 613 34 1,194 34 Total stock compensation
expense $782 $34 $1,479 $34 RITA MEDICAL SYSTEMS, INC. CONDENSED
CONSOLIDATED BALANCE SHEETS (In thousands, unaudited) June 30,
December 31, 2006 2005 Assets Current assets: Cash and cash
equivalents $5,881 $5,522 Accounts and note receivable, net 7,658
7,264 Inventories 5,445 5,380 Prepaid assets and other current
assets 1,329 941 Total current assets 20,313 19,107 Long term note
receivable, net -- 58 Property and equipment, net 1,775 1,959
Goodwill 91,339 91,339 Intangible assets 22,419 23,502 Other assets
432 502 Total assets $136,278 $136,467 Liabilities and
stockholders' equity Current liabilities: Accounts payable and
accrued liabilities $6,265 $5,397 Current portion of long term debt
-- 113 Total current liabilities 6,265 5,510 Long term liabilities
9,775 9,762 Stockholders' equity 120,238 121,195 Total liabilities
and stockholders' equity $136,278 $136,467 RITA MEDICAL SYSTEMS,
INC. SALES BY REGION AND PRODUCT LINE (In thousands, unaudited)
Three Months Ended Six Months Ended June 30, June 30, 2006 2005
2006 2005 Domestic Sales Localized therapy products* $4,779 $3,892
$9,488 $7,493 Specialty Access Catheter Products 5,658 5,846 11,093
11,894 Total 10,437 9,738 20,581 19,387 International Sales
Localized therapy products* 1,757 1,270 3,524 2,197 Specialty
Access Catheter Products 606 947 1,214 1,576 Total 2,363 2,217
4,738 3,773 Total Sales Localized therapy products* 6,536 5,162
13,012 9,690 Specialty Access Catheter Products 6,264 6,793 12,307
13,470 Total $12,800 $11,955 $25,319 $23,160 * Includes
radiofrequency products and embolization products RITA MEDICAL
SYSTEMS, INC. PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (In thousands, except per share data, unaudited) Three
Months Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005
Sales $12,800 $11,955 $25,319 $23,160 Cost of goods sold 4,753
4,479 9,524 9,140 Gross profit 8,047 7,476 15,795 14,020 Operating
expenses: Research and development 1,279 999 2,474 2,038 Selling,
general and administrative 6,887 6,986 14,211 13,358 Restructuring
charges -- -- -- 60 Total operating expenses 8,166 7,985 16,685
15,456 Loss from operations (119) (509) (890) (1,436) Interest
expense (175) (211) (347) (498) Interest income and (other
expense), net (112) (94) (60) (28) Pro-forma Net loss $(406) $(814)
$(1,297) $(1,962) Pro-forma Net loss per common share, $(0.01)
$(0.02) $(0.03) $(0.05) basic and diluted Shares used in computing
net loss per common share, basic and diluted 43,153 41,548 43,100
41,503 Reconciliation of Actual GAAP Net Loss to Non-GAAP Pro Forma
Net Loss (in $000) Three Months Ended Six Months Ended June 30,
June 30, 2006 2005 2006 2005 GAAP Net Loss $(1,555) $(1,387)
$(3,510) $(3,075) Add: Stock Compensation Cost of Goods 42 -- 73 --
Research and Development 127 -- 212 -- Selling, General and
Administrative 613 34 1,194 34 Total Stock Compensation 782 34
1,479 34 Sub-total $(773) $(1,353) $(2,031) $(3,041) Add:
Amortization of Acquisition Intangibles Cost of Goods 59 144 118
288 Research and Development -- -- -- -- Selling, General and
Administrative 308 395 616 791 Total Amort. Of Acquisition
Intangibles 367 539 734 1,079 Non-GAAP Pro Forma Net Loss $(406)
$(814) $(1,297) $(1,962) Reconciliation of GAAP Loss to Earnings
before Interest, Taxes, Depreciation, Amortization and Stock
Compensation Expense (in $000) ("EBITDA") Three Months Ended Six
Months Ended June 30, June 30, 2006 2005 2006 2005 GAAP Net Loss
$(1,555) $(1,387) $(3,510) $(3,075) Add: Depreciation 330 242 677
498 Add: Amortization Acquisition Intangibles 367 539 734 1,079
Other Intangibles 175 158 349 332 Add: Interest Expense 175 211 347
498 Deduct: Interest Income (58) (29) (115) (87) Sub-total $(566)
$(266) $(1,518) $(755) Add: Stock Compensation Expense 782 34 1,479
34 EBITDA (without Stock compensation expense) $216 $(232) $(39)
$(721) Outlook Ranges - Reconciliation of GAAP Net Loss to Non-GAAP
Proforma Net Loss (in $000) Three Months Ended Twelve Months Ended
September 30, 2006 December 31, 2006 GAAP Net Loss $(2,100) to
$(2,700) $(5,300) to $(7,300) Add: Stock Compensation Expense 800
to 850 2,800 to 3,300 Sub-total $(1,300) to $(1,850) $(2,500) to
$(4,000) Add: Amortization of Acquisition Intangibles 350 to 350
1,500 to 1,500 Pro-forma Net Loss $(950) to $(1,500) $(1,000) to
$(2,500) Outlook Ranges - Additional Details (Dollars in $000)
Revenue $12,200 to $12,700 $51,500 to $53,500 Gross Profit
Percentage 59.0% to 60.0% 60.0% to 62.0% R&D; SG&A Expenses
$8,800 to $8,900 $34,500 to $35,000 (excluding FASB 123R stock
compensation expense) Other Expense, primarily interest $200 to
$200 $800 to $800 FASB 123R Stock Compensation Expense $800 to $850
$2,800 to $3,300 GAAP Net Loss (including FASB 123R) $(2,100) to
$(2,700) $(5,300) to $(7,300) Pro-forma Net Loss $(950) to $(1,500)
$(1,000) to $(2,500) (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, , both at +1-415-896-6820, or media, Steve
DiMattia, +1-646-277-8706, or , all of EVC Group, for RITA Medical
Systems, Inc. Web site: http://www.ritamedical.com/
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