IsoTis Announces 16% H1 Orthobiologics Sales Growth, and Provides Further 04 & 05 Guidance
Lausanne, Switzerland and Irvine, California (ots/PRNewswire)
IsoTis OrthoBiologics (SWX/Euronext: ISON; TSX: ISO) today reported a 16% increase in orthobiologics sales of US$12.9 million for the first six months of fiscal 2004, compared to pro-forma orthobiologics sales of US$11.1 million for the first six months of 2003. Sales for the second quarter 2004 were US$6.4 million, representing a 10% increase over pro-forma sales from the same period last year.
Orthobiologics Sales Analysis
Sales increases have been primarily driven by the Company's Accell(R) technology. The two product lines using this technology, Accell(R) DBM100 and Accell Connexus(TM), now account for approximately 40% of sales.
North American orthobiologic sales increased 10% to US$10.7 million for the first six months of 2004, compared to proforma sales of US$9.7 million for 2003. Second quarter sales increased 4% to US$5.3 million, compared to pro-forma second quarter 2003 sales of US$5.1 million. The Company recorded significant gains in international sales, which grew by 52% to US$2.2 million for the six month period as compared to US$1.4 million for the six month period in 2003. International sales for the quarter increased 47% to US$1.1 million from pro-forma second quarter 2003 sales of US$0.8 million, as IsoTis continues to develop and strengthen its international distribution channels.
Results Comparison
EBITDA loss for the first six months of 2004 was US$11.4 million, which reflects the merged operations of IsoTis/Modex and GenSci. This compares to an EBITDA loss of US$10.1 million in the same period of 2003, which reflects only the operations of IsoTis and Modex. The Company has incurred losses in 2004 as it has aggressively re-invested over 40% of its revenue in research and development. In addition, the Company has doubled its US field sales and training team in the second quarter to further support its independent distributors. The net loss for the first six months was US$12.2 million, or US$0.17 per share, compared to a net loss of US$10.7 million, or US$0.26 per share, for the same period of 2003. The company reported a net loss for the quarter of US$9 million, or US$0.13 per share compared with a loss of US$4.5 million, or US$0.11 per share in the same period last year.
The balance sheet remains strong, with a cash plus restricted cash position at June 30 exceeding US$44 million.
Second Quarter Significant Events
- OsSatura TCP(TM) (Tricalcium Phosphate) launched with 510(k) clearance
and CE mark, expanding synthetic bone graft substitute portfolio;
- Jean-Pierre Boucher, former President Stryker Europe, appointed to
Board of Directors;
- Announced transfer production and product development to Irvine
(California) per end of 2004;
- Strengthened research effort through increased resources for
IsoTis/Twente Research Institute;
- Relocated Swiss corporate offices to more economic space in Lausanne;
- Announced positive results Phase II Allox(TM) trial (part of EpiSource,
IsoTis' wound management subsidiary, and under a licensing agreement
with DFB/HealthPoint, one of the leading US wound management
companies)Pieter Wolters, Chief Executive Officer of IsoTis OrthoBiologics, said: "We are extremely pleased that while we have been integrating the operations of our newly formed company we have been able to show growth in a very competitive market place. We anticipate that the upcoming launch of our third product using the Accell technology will further build our competitive position as we continue to focus on opportunities in the rapidly growing orthopedics sector and the continuing shift towards biologically-based surgical solutions for musculoskeletal repair."
Outlook 2004 & 2005
During the remainder of 2004 through 2005, the Company expects to launch several new products for the orthobiologics market. Also during this time frame, the Company expects to obtain regulatory approval for certain products to add to its existing regulatory approved synthetic products and medical accessories.
Based on internal growth the Company expects revenue from orthobiologic products to be in the US$25-US$28 million range for 2004. This compares to proforma orthobiologic product sales of approximately US$23 million for 2003.
The company expects to continue investment in marketing, sales and training as well as in research and development of current products for 2004 and 2005 to drive the growth of the Company. Therefore, the Company expects to continue to incur losses at a similar rate through 2004. The operating loss for 2004 is expected to be between US$25-29 million as compared to a proforma operating loss of US$32 million in 2003. The operating loss range will result in an EBITDA range of US$18-23 million. Cash and restricted cash balances are expected to be in the US$25-US$30 million range at the end of 2004.
The previously announced closure of the Netherlands facility will result in reorganization charges, to be taken primarily in the fourth quarter of 2004, that are included in the guidance above. The facility is operating through November to meet Company objectives. Reorganization charges in the current quarter of US$1.8 million relate to a reserve against prior receipts of grant income in The Netherlands. Closure costs are estimated to total US$3-5 million dollars and will result in significant annual cost savings going forward. Additional reductions in future spending will result from the completion of the successful Phase II trial for Allox and relocation of the Company's Swiss corporate offices to smaller premises.
For the full year 2005, IsoTis expects to close in on break-even in the course of the year, building on the organization and products put in place in 2004. With a more centralized operation and new products to offer, IsoTis is expressly focusing on and investing in products and technologies that will allow us to be on the cutting edge of the orthobiologics field well beyond 2005.
Conference Call
The Company will conduct a conference call for financial analysts at 4 p.m. CET (10 a.m. EDT; 7 a.m. PDT), today. Access to a simulcast via the IsoTis website at http://www.isotis.com. To participate in the conference call, dial: +41 91 610 5600 (Europe); +44 20 7107 0611 (UK); +1 866 291 4166 (toll free dial in US/Canada). Digital playback is available for 24 hours after the conference starting at 6 p.m. until 12 August 6 p.m., dial: +41 91 612 4330 (Europe); +44 20 7866 4300 (UK); +1 412 317 0088 (US/Canada); Conference ID: 794#. An audio stream of the conference call will also be available on IsoTis' website from August 12 through September 30, 2004.
IsoTis OrthoBiologics was created in Q4 2003 through the merger of GenSci OrthoBiologics, a US-based orthobiology company, and IsoTis SA, a Swiss-Dutch biomedical company. IsoTis OrthoBiologics has a product portfolio with several natural and synthetic bone graft substitutes on the market and several others in development, sales of US$ 24 million in 2003, an established North American independent distribution network of 400 sales representatives, and a rapidly expanding international presence. IsoTis OrthoBiologics expects to have approximately 140 employees by the end of 2004.
The field of orthobiologics combines advances in biotechnology, materials sciences and tissue biology to promote and enhance the body's natural ability to regenerate and repair musculoskeletal tissue. The company is a dedicated and global orthobiologics player focused on the market of orthopaedics and bone graft substitutes. IsoTis is developing a broad presence in both "natural" demineralized bone matrix (DBM) products and "synthetic" bone graft substitutes, carrier technologies and biologically-based growth factors. Orthobiologics is the fastest growing segment of the US$14 billion orthopedics market.
Certain statements in this Press Release are "forward-looking statements," including those that refer to management's plans and expectations for future operations, prospects and financial condition. One can identify these forward-looking statements by use of words such as 'strategy,' 'expects,' 'plans,' 'anticipates,' 'believes,' 'will,' 'continues,' 'estimates,' 'intends,' 'projects,' 'goals,' 'targets' and other words of similar meaning. One can also identify them by the fact that they do not relate strictly to historical or current facts. Such statements are based on the current expectations of the management of IsoTis S.A. only. Reliance should not be placed on these statements because, by their nature, they are subject to known and unknown risks and can be affected by factors that are beyond the control of IsoTis. Actual results could differ materially from current expectations due to a number of risk factors and uncertainties, including but not limited to the timely commencement and success of IsoTis' clinical trials and research endeavors, delays in receiving U.S. FDA or other regulatory approvals (a.o. EMEA, CE), market acceptance of the Company's products, development of competing therapies and/or technologies, the terms of any future strategic alliances, the need for additional capital, the inability to obtain, or meet conditions imposed for the required governmental and regulatory approvals and consents. For a more detailed description of the risk factors and uncertainties affecting IsoTis, refer to the Joint Information Circular and to IsoTis' reports filed from time to time with the Swiss Stock Exchange (SWX), Euronext Amsterdam N.V., and SEDAR at http://www.sedar.com, as well as the Toronto Stock Exchange (TSX). This communication shall not constitute an offer to sell or the solicitation of an offer to buy securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.)
Three Three
IsoTis S.A. Months Months Six Months Six Months
US Dollars - Unaudited Ended Ended Ended Ended
Consolidated Statements of
Operations 30-Jun-04 30-Jun-03 30-Jun-04 30-Jun-03
Revenues
Product sales 6,414,237 454,413 13,004,852 1,073,803
Government grants 12,045 98,683 37,141 224,033
Research and development
contracts 0 0 0 19,271
Total revenues 6,426,282 553,096 13,041,993 1,317,107
Costs and expenses
Costs of sales 2,942,624 294,788 5,759,165 516,309
Research and development 2,629,798 2,610,585 5,462,040 6,885,321
Marketing and selling 3,179,278 1,221,855 6,014,479 2,204,445
General and
administrative 4,850,293 1,334,550 8,217,831 2,879,925
Reorganization costs 1,793,733 0 1,793,733 0
Total operating expenses 15,395,726 5,461,778 27,247,248 12,486,000
Loss from operations (8,969,444) (4,908,682) (14,205,255) (11,168,893)
Interest income 85,756 246,772 229,829 691,100
FX gain on foreign
exchange 949,474 0 1,916,516 0
FX gain/(loss) on
intercompany account (989,179) 0 17,748 0
Interest expense and other (62,750) (78,300) (142,146) (100,923)
Net loss before taxes,
minority interest and
extraordinary item (8,986,143) (4,740,210) (12,183,308) (10,578,716)
Minority interest 0 63,154 0 138,996
Net loss from continuing
operations (8,986,143) (4,677,056) (12,183,308) (10,439,719)
Net gain/(loss) from
discontinued operations 0 151,718 0 (273,312)
Net loss (8,986,143) (4,525,338) (12,183,308) (10,713,032)
Basic and diluted net loss
per share
Continuing operations ($0.13) ($0.11) ($0.17) ($0.25)
Discontinued operations $0.00 $0.00 $0.00 ($0.01)
Net loss per share ($0.13) ($0.11) ($0.17) ($0.26)
Weighted average ordinary
shares outstanding 69,804,834 41,433,629 69,691,793 41,327,695
IsoTis S.A.
US Dollars - Unaudited
Consolidated Balance Sheets 30-Jun-04 31-Dec-03
Assets
Current assets:
Cash and cash equivalents 37,262,325 50,104,682
Restricted Cash 2,218,071 1,629,802
Trade receivables, net 4,617,164 3,588,780
Inventories 8,544,839 6,366,588
Unbilled receivables 401,301 1,732,402
Value added tax receivable 207,193 476,651
Prepaid expenses and other current assets 851,299 1,073,284
Total current assets 54,102,192 64,972,189
Non-current assets:
Restricted Cash 5,330,951 6,519,385
Property, plant and equipment, net 4,084,172 5,113,851
Goodwill 16,383,069 16,383,069
Intangible assets, net 21,895,031 23,134,485
Total non-current assets 47,693,223 51,150,790
Total assets 101,795,415 116,122,979
Liabilities and shareholders' equity
Current liabilities:
Trade payables 3,655,770 4,007,873
Accrued liabilities 8,474,235 7,292,133
Deferred revenue 0 98,893
Current portion of capital lease obligations 0 631,783
Current portion of interest-bearing loans 6,291,723 6,213,502
Total current liabilities 18,421,728 18,244,184
Non-current liabilities:
Capital lease obligations 0 36,140
Interest-bearing loans and borrowings 3,499,998 4,079,341
Total non-current liabilities 3,499,998 4,115,481
Total shareholders' equity 79,873,689 93,763,314
Total liabilities and shareholders' equity 101,795,415 116,122,979
IsoTis S.A. Six Months Six Months
US Dollars - Unaudited Ended Ended
Consolidated Statements of Cash Flows 30-Jun-04 30-Jun-03
Cash flows from operating activities
Net loss (12,183,308) (10,713,032)
Adjustments to reconcile net loss to
net cash used in operating activities
(net of effect of business combination):
Depreciation and amortization 2,777,780 1,094,279
Stock based compensation expense 160,650 1,589,351
Minority interest 0 (138,996)
Change in operating assets and liabilities:
Inventories (2,207,049) (149,601)
Trade receivables (1,074,952) (637,710)
Other current assets 1,751,208 1,117,652
Deferred revenue (100,900) (83,122)
Trade and other payables 875,186 (3,264,561)
Net cash flows used in operating activities (10,001,385) (11,185,740)
Cash flows from investing activities
Purchase of intangible assets (367,753) (385,868)
Purchase of property, plant and equipment (286,999) 0
Proceeds from sale of property,
plant and equipment 0 148,946
Change in restricted cash 496,331 0
Payment of business combination transaction
costs 0 (788,462)
Net cash flows provided by (used in)
investing activities (158,421) (1,025,384)
Cash flow from financing activities
Proceeds from issuance of ordinary shares 461,166 0
Proceeds from interest-bearing loans
and borrowings 0 1,549,223
Repayments of interest-bearing loans
and borrowings (981,063) (283,028)
Net cash provided by (used in) financing
activities (519,897) 1,266,195
Gain (loss) on cash held in foreign currency (2,162,654) 1,515,628
Net increase (decrease) in cash and
cash equivalents
Continuing operations (12,842,357) (9,429,301)
Discontinued operations 0 (1,790,408)
Net increase (decrease) in cash and
cash equivalents (12,842,357) (11,219,709)
Cash and cash equivalents at the beginning
of the year 50,104,682 85,306,817
Cash and cash equivalents at the end
of the year 37,262,325 74,087,108
Proforma Sales Analysis for the Combined Companies:
IsoTis S.A.
US Dollars - Unaudited
Three Three
Months Months Q2 2004 vs. Q2 2003
Ended Ended Variance Analysis
30-Jun-04 30-Jun-03 $ %
Revenues
Product sales - OrthoBiologic 6,386,973 5,823,301 563,672 10%
Product sales - Other 27,264 300,387 (273,123) -91%
Government grants 12,045 104,379 (92,334) -88%
Total revenues 6,426,282 6,228,067 198,215 3%
Six Six
Months Months H1 2004 vs. H1 2003
Ended Ended Variance Analysis
30-Jun-04 30-Jun-03 $ %
Revenues
Product sales - OrthoBiologic 12,858,408 11,128,921 1,729,487 16%
Product sales - Other 146,445 639,635 (493,190) -77%
Government grants 37,140 229,734 (192,594) -84%
Research and development
contracts 0 19,272 (19,272) -100%
Total revenues 13,041,993 12,017,562 1,024,431 9%
Three Three
Months Months Q2 2004 vs. Q2 2003
Ended Ended Variance Analysis
30-Jun-04 30-Jun-03 $ %
Product sales - OrthoBiologic
North America 5,265,697 5,062,135 203,562 4%
Europe and other International 1,121,276 761,166 360,110 47%
Total OrthoBiologic revenues 6,386,973 5,823,301 563,672 10%
Six Six
Months Months H1 2004 vs. H1 2003
Ended Ended Variance Analysis
30-Jun-04 30-Jun-03 $ %
Product sales - OrthoBiologic
North America 10,657,630 9,681,217 976,413 10%
Europe and other International 2,200,778 1,447,704 753,074 52%
Total OrthoBiologic revenues 12,858,408 11,128,921 1,729,487 16%
IsoTis S.A.
US Dollars - Unaudited
Consolidated Balance Sheet 30-Jun-04 31-Dec-03
Cash and cash equivalents 37,262,325 50,104,682
Restricted Cash - Current 2,218,071 1,629,802
Restricted Cash - Long Term 5,330,951 6,519,385
Total non-current assets 44,811,347 58,253,869
IsoTis S.A. Six Months Six Months
US Dollars - Unaudited Ended Ended
Consolidated Statements of Operations 30-Jun-04 30-Jun-03
Loss from operations (14,205,255) (11,168,893)
Depreciation and amortization 2,777,780 1,094,279
EBITDA (11,427,475) (10,074,614)
IsoTis S.A. Three Months Six Months
US Dollars - Unaudited Ended Ended
Consolidated Statements of Operations 30-Jun-04 30-Jun-04
Total revenues 6,426,282 13,041,993
Research and development 2,629,798 5,462,040
Research and development - Reinvestment % 41% 42%Web site: http://www.isotis.com
Contact:
Hans Herklots, +41-21-620-6011, Fax: +41-21-620-6060,
hans.herklots@isotis.com, or Louis G. Plourde, 1-800-561-2955 (North
America), or +1-514-277-5984, louis.plourde@isotis.com, both of
IsoTis OrthoBiologics