Advanced Neuromodulation Systems Reports Record Quarterly Revenue
of $38.7 Million and EPS of $0.25 Neuro Revenue Increased 26.1%
Versus Second Quarter of 2004 and 21.4% Sequentially DALLAS, July
28 /PRNewswire-FirstCall/ -- Advanced Neuromodulation Systems, Inc.
(ANS) (NASDAQ:ANSI) today announced record revenue for the second
quarter of 2005, as sales of neuromodulation products increased
26.1% compared to the second quarter of 2004 and 21.4%
sequentially. The Company also reported earnings per fully diluted
share of $0.25. Second Quarter Results For the three months ended
June 30, 2005, revenue increased 26.9% to a record $38,693,000 from
$30,488,000 for the second quarter of 2004. Sales of neuro products
increased 26.1% to $34,855,000 for this year's second quarter
compared to $27,633,000 for last year's second quarter, and
increased 21.4% compared to the first quarter of 2005. This growth
was driven by strong sales of ANS' Genesis(R) and GenesisXP(TM)
implantable spinal cord stimulation (SCS) systems for the treatment
of chronic pain, as well as expanded market availability beginning
late in the quarter of the Company's new flagship rechargeable
implantable pulse generator (IPG) system, the Eon(TM)
Neurostimulation System. Gross margin was 72.9% for this year's
second quarter compared to 72.5% for the second quarter of 2004.
Research and development spending increased 55.6% to $4,465,000
from $2,870,000 to support ANS' new product and new indication
development initiatives. Marketing expense was about unchanged as a
percentage of revenue for this year's second quarter versus last
year, while G&A expense increased to 10.4% of revenue from 8.9%
last year, reflecting higher legal and recruiting and relocation
expenses. Net income for the second quarter of 2005 increased 17.6%
to $5,086,000, or $0.25 per diluted share, from $4,323,000, or
$0.21 per diluted share, for the second quarter of 2004. At June
30, 2005, ANS had total cash and marketable securities of
approximately $154.5 million. ANS has no debt. To date, the Company
has repurchased 923,674 shares of its common stock under a
2,000,000-share repurchase authorization. First Half Results For
the six months ended June 30, 2005, revenue increased 24.3% to a
record $71,029,000 from $57,121,000 for the first half of 2004.
Neuro sales increased 22.6% to $63,572,000 compared to $51,861,000
last year. Net income for the first six months of 2005 was
$63,655,000, or $3.06 per diluted share. This compares to net
income for the first six months of 2004 of $8,292,000, or $0.39 per
diluted share. Net income for this year's first half included a
pre-tax gain of $85,244,000 from the previously announced sale of
Cyberonics, Inc. common stock acquired in August 2004. Expanded
Market Launch Of Eon Neurostimulation System On June 21, 2005, ANS
announced an expanded U.S. market launch of its newest rechargeable
IPG system, the Eon Neurostimulation System, after successfully
completing a market test and increasing inventories. "Sales
significantly exceeded our expectations, and we sold out our
inventory of Eon systems within four weeks," said President and CEO
Chris Chavez. "We will increase production of Eon as quickly as
possible, but until our capacity increases over the next few months
to meet demand, we will have to carefully manage allocation of this
exciting new rechargeable IPG system." "ANS enjoys the broadest,
most advanced product offering in the industry to address the needs
of interventional pain physicians and their pain patients. With our
impressive line of generators and an equally impressive list of
leads and programmers, we believe we are uniquely positioned to
address the diverse needs of the market at many different price
points. We expect our expanded product range, combined with our
excellent sales representation in the field and our dedication to
providing excellent customer service, to sustain ANS' highly
competitive position in interventional neuromodulation." Expanded
Clinical Indications For Neuromodulation "The interventional
neuromodulation market now exceeds one billion dollars, and
promises to become a multi-billion dollar, multi-indication
modality in the years ahead. The clinical indications that
neuromodulation can address are large, under-served and
under-penetrated. Neuromodulation holds the promise to improve the
quality of life for millions of people who suffer from chronic pain
and other chronic diseases. As more and more people become aware of
the benefits of neuromodulation, we are increasingly excited about
our mission to develop ever-improving neuromodulation technologies
to address an expanding set of clinical indications." Chavez noted
that ANS decided in the first quarter to accelerate clinical
studies, regulatory approval efforts and product development. "We
are leveraging our platform technologies into emerging clinical
applications that we believe will fuel strong organic growth for
years to come. In addition to the planned pivotal studies to treat
migraine headaches, essential tremor and Parkinson's disease and
the pilot study to treat chronic treatment-resistant depression, we
are systematically incubating such promising new indications as
pelvic pain, obesity, tinnitus, angina, ischemic pain associated
with peripheral vascular disease, obsessive compulsive disorder,
and traumatic brain injury." The CEO continued, "ANS is making good
progress on an extensive pipeline of clinical trials and emerging
therapies. Multiple sites have been initiated in the Essential
Tremor pivotal trial, patients are being recruited, and we
anticipate that the initial implants will occur in third quarter.
In mid-April, ANS received FDA approval for a 136-patient pivotal
trial at 12 sites for Parkinson's disease, and we have been
aggressively working through the Institutional Review Boards (IRBs)
as well as clinical study agreements at the investigational sites.
We currently anticipate that the first implant will also occur in
third quarter. ANS also received conditional approval from the FDA
for a 20-patient, 3-center, Interstitial Cystitis study which is
expected to get underway in the fourth quarter." Regarding the
migraine pivotal trial, Chavez said, "The goal of a pivotal trial
is to prove safety and efficacy for the indicated population. Our
physician advisors recommended a modification to our approved FDA
pivotal trial protocol for migraine that will broaden the indicated
population and perhaps ultimately speed up patient enrollment. We
are preparing to submit these changes to the FDA, and now expect
implants for this indication to begin in the fourth quarter of
2005. "The prospect of using neurostimulation to treat various
psychiatric diseases is gaining momentum and generating excitement
in the neurosurgical community. We recently received an approval in
Canada to begin our pilot study for treatment-resistant depression
and will soon begin recruiting patients. Additionally, we recently
acquired exclusive intellectual property to stimulate a specific
target in the brain to treat Obsessive Compulsive Disorder."
Management Reaffirms Revenue Guidance for 2005 and Increases EPS
Guidance Chavez said that management continues to expect revenue
for 2005 of approximately $145 million. We continue to expect to
significantly increase our investment in clinical studies,
regulatory and R&D in 2005 compared to 2004. Including the
impact of these increases, and taking into account the decreased
number of issued and outstanding shares as a result of our stock
repurchases, we are increasing our forecast for net income for 2005
to a range of $3.54 to $3.57 per diluted share," Chavez said.
Previously, management had expected net income in the range of
$3.49 to $3.52 per diluted share. Conference Call ANS has scheduled
a conference call today at 11:00 a.m. EDT. 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 #21252499, after 1:00 p.m. EDT. 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
36th 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 market acceptance of our new
rechargeable IPGs, as well as continued market acceptance of our
conventional IPGs and radio-frequency powered SCS systems;
competition from and 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
the Company's IPG and RF systems, which could adversely affect
revenues and profitability; 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 litigation
generally, including without limitation the intellectual property
and patent litigation against Advanced Bionics and the securities
class action litigation filed in the first quarter of 2005;
obtaining necessary government approvals for 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; successful
patient enrollment in and timely implementation of the IDE clinical
studies for migraine headache, Essential Tremor and Parkinson's
disease; physician and patient acceptance of the Libra DBS system
for the Essential Tremor and Parkinson's disease studies, for which
already-approved products are already available on the market; the
uncertainty of clinical results that may ensue from these and other
clinical studies; the risk that the FDA may not approve our PMA
applications for these applications following the completion of the
clinical trials; the satisfactory completion of feasibility, pilot
and pivotal studies and/or market tests prior to the introduction
of new products generally; successful integration of acquired
businesses, products and technologies; 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. (tables attached) ADVANCED NEUROMODULATION SYSTEMS, INC.
and SUBSIDIARIES Condensed Consolidated Statements of Income
(Unaudited) Three Months Ended Six Months Ended June 30, June 30,
2005 2004 2005 2004 Net revenue $38,693,227 $30,487,851 $71,028,690
$57,120,714 Cost of revenue 10,475,418 8,371,311 18,922,252
15,336,843 Gross profit 28,217,809 22,116,540 52,106,438 41,783,871
Operating expenses: Sales and marketing 12,051,776 9,454,727
22,142,095 18,018,773 Research and development 4,464,991 2,869,660
7,789,698 5,184,610 General and administrative 4,007,926 2,706,956
7,351,380 5,023,696 Amortization of other intangibles 657,547
623,773 1,297,527 1,198,647 21,182,240 15,655,116 38,580,700
29,425,726 Income from operations 7,035,569 6,461,424 13,525,738
12,358,145 Other income (expense): Gain on sale of investment in
common stock of Cyberonics, Inc. --- --- 85,244,301 --- Foreign
currency transaction loss (117,190) (25,506) (164,815) (54,853)
Investment income 1,091,257 229,842 1,638,118 481,171 974,067
204,336 86,717,604 426,318 Income before income taxes 8,009,636
6,665,760 100,243,342 12,784,463 Income taxes 2,923,517 2,342,348
36,588,820 4,492,460 Net income $5,086,119 $4,323,412 $63,654,522
$8,292,003 Basic income per share: Net income $0.26 $0.22 $3.18
$0.41 Number of basic shares 19,678,020 20,107,481 20,022,505
20,018,213 Diluted income per share: Net income $0.25 $0.21 $3.06
$0.39 Number of diluted shares 20,442,848 21,047,875 20,817,647
21,158,756 ADVANCED NEUROMODULATION SYSTEMS, INC. and SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited) June 30, December
31, 2005 2004 Assets Current assets: Cash and marketable securities
$154,479,782 $124,016,064 Receivable, trade net 29,860,358
25,322,813 Receivable, investment income and other 1,699,372
638,987 Inventories 23,811,609 23,923,851 Deferred income taxes
1,997,418 2,029,091 Prepaid expenses and other current assets
1,725,235 1,888,957 Total current assets 213,573,774 177,819,763
Net property, equipment and fixtures 34,213,645 33,175,329 Minority
equity investments in preferred stock 1,104,000 1,104,000 Goodwill,
patents, tradenames purchased technology & other assets, net
35,003,340 35,388,049 Total assets $283,894,759 $247,487,141
Liabilities and Stockholders' Equity Current liabilities: Accounts
payable $2,913,064 $3,206,516 Accrued salary and employee benefit
costs 3,549,714 2,390,721 Accrued commissions 2,641,180 2,656,112
Income taxes payable 16,626,851 708,412 Deferred revenue 107,028
165,861 Other accrued expenses 750,497 342,075 Total current
liabilities 26,588,334 9,469,697 Deferred income taxes 6,126,604
14,734,487 Non-current deferred revenue 643,605 718,820 Total
stockholders' equity 250,536,216 222,564,137 Total liabilities and
stockholders' equity $283,894,759 $247,487,141 DATASOURCE: Advanced
Neuromodulation Systems, Inc. CONTACT: investors, 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/ http://www.ans-medical.com/investors
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