CryoLife, Inc. (NYSE: CRY), an implantable biological medical device and cardiovascular tissue processing company, announced today its results for the second quarter of 2010. Revenues for the second quarter increased 4 percent to a second quarter record of $29.3 million compared to $28.2 million for the second quarter of 2009. Net income for the second quarter of 2010 was $2.9 million, or $0.10 per basic and fully diluted common share, compared to $2.5 million, or $0.09 per basic and fully diluted common share, for the second quarter of 2009.
"We are very pleased to be reporting record second quarter revenues and our 14th consecutive quarter of profitability. CryoLife continues to execute effectively on its business plan despite a challenging economy, as evidenced by the $3.7 million increase in our cash, cash equivalents, and restricted securities in the quarter to $41.4 million. We believe that our continuing strong operating performance, coupled with our ongoing stock repurchase plan and business development initiatives, will lead to enhanced shareholder value over the near- and long-term," stated Steven G. Anderson, president and chief executive officer.
The Company recorded pretax charges in the second quarter of 2010 of approximately $420,000 in costs related to litigation with Medafor and recorded a $385,000 gain on valuation of the derivative related to the investment in Medafor common stock.
Revenues for the first six months of 2010 increased 8 percent to a first six month record of $59.0 million compared to $54.9 million for the first six months of 2009. Net income for the first six months of 2010 was $4.9 million, or $0.17 per basic and fully diluted common share, compared to $4.5 million, or $0.16 per basic and fully diluted common share for the first six months of 2009.
The Company recorded pretax charges in the first six months of 2010 of $729,000 in connection with the write-off of capitalized legal expenses associated with BioGlue® Surgical Adhesive intellectual property rights in Germany and approximately $834,000 in costs related to litigation with Medafor. Additionally, the Company recorded a $1.2 million gain on valuation of the derivative related to the investment in Medafor common stock.
Preservation service revenues for the second quarter of 2010 increased 6 percent to $15.0 million compared to $14.1 million for the second quarter of 2009. Preservation service revenues for the first six months of 2010 increased 11 percent to $30.6 million compared to $27.6 million for the first six months of 2009. The increase in preservation service revenues for the second quarter of 2010 was primarily due to increased shipments of vascular tissues. The increase in preservation service revenues for the first six months of 2010 was primarily due to increased shipments of both cardiac and vascular tissues.
Product revenues, which consist primarily of sales of BioGlue and HemoStase®, were $14.1 million for the second quarter of 2010 compared to $13.9 million for the second quarter of 2009, an increase of 2 percent. Product revenues were $28.1 million for the first six months of 2010 compared to $26.9 million for the first six months of 2009, an increase of 5 percent. The increase year over year primarily reflects the growing usage of HemoStase in cardiac and vascular surgical indications in the U.S., and cardiac, vascular, and general surgery indications in many markets outside of the U.S.
Total preservation services and product gross margins were 61 percent for the second quarter of 2010 and 63 percent for the second quarter of 2009. Total preservation services and product gross margins were 60 percent and 64 percent for the first six months of 2010 and 2009, respectively.
Preservation services gross margins were 40 percent for the second quarter of 2010 and 43 percent for the second quarter of 2009. Preservation services gross margins were 40 percent and 44 percent for the first six months of 2010 and 2009, respectively.
Product gross margins were 82 percent for the second quarter of 2010 and 84 percent for the second quarter of 2009. Product gross margins were 82 percent and 84 percent for the first six months of 2010 and 2009, respectively.
General, administrative, and marketing expenses for the second quarter of 2010 were $11.7 million compared to $12.3 million for the second quarter of 2009. General, administrative, and marketing expenses for the second quarter of 2010 included approximately $420,000 in costs related to litigation with Medafor.
General, administrative, and marketing expenses for the first six months of 2010 were $25.5 million compared to $25.1 million for the first six months of 2009. General, administrative, and marketing expenses for the first six months of 2010 included a charge of $729,000 related to the write-off of capitalized legal expenses associated with BioGlue intellectual property rights in Germany and approximately $834,000 in costs related to litigation with Medafor.
Research and development expenses were $1.2 million and $1.4 million for the second quarters of 2010 and 2009, respectively. Research and development expenses were $2.5 million and $2.4 million for the first six months of 2010 and 2009, respectively. Research and development spending in the first six months of 2010 was primarily focused on the Company's BioGlue, BioFoam™ Surgical Matrix, and SynerGraft® tissues and products.
Other income of $215,000 and $865,000 in the second quarter and the first six months of 2010, respectively, consisted primarily of a $385,000 and $1.2 million gain on valuation of the derivative related to the investment in Medafor common stock.
As of June 30, 2010, the Company had $41.4 million in cash, cash equivalents, and restricted securities, compared to $35.1 million at December 31, 2009. Of this $41.4 million, $2.4 million was received from the U.S. Department of Defense as advance funding for the development of BioFoam protein hydrogel technology, and $5.3 million was designated as restricted securities primarily due to a financial covenant requirement under the Company's credit agreement. The Company has net operating loss carryforwards that will reduce required cash payments for federal and state income taxes for the 2010 tax year.
Medafor Update
As previously disclosed, on March 18, 2010, Medafor informed the Company that Medafor was terminating the exclusive distribution agreement (EDA) between the parties. CryoLife filed a motion for a preliminary injunction against Medafor's termination of the EDA in the U.S. District Court for the Northern District of Georgia. The court held hearings on the motion on May 10 and June 28, 2010, but has not yet ruled on CryoLife's motion.