STAAR Surgical Company (Nasdaq: STAA), a leading developer, manufacturer and marketer of minimally invasive ophthalmic products, today reported results for the second quarter ended July 2, 2010. Revenue for the period grew 3.7% to $13.6 million with the revenue from core products, IOLs and ICLs, increasing by 7%. For the first half of 2010 core product revenues increased by 11% reflecting market share gains by STAAR. In addition STAAR generated cash from operating activities after excluding the effect of a legal settlement payment in the quarter, and concluded the quarter with a much stronger balance sheet. The Company ended the quarter with $8.1 million in cash and restricted cash, and the Company is essentially debt free except for an ongoing line of credit in Japan. The Company also accrued two one-time non-cash charges for the quarter totaling approximately $1million: one for an executive severance expense and the second for the early extinguishment of the debt on the Broadwood note.
"While our year to date core product revenue continues to reflect double-digit growth over prior year, two factors impacted our second quarter growth," said Barry G. Caldwell, President and CEO. "First, in Korea, our distribution partner has formed a new legal entity to focus exclusively on marketing the Visian product line. They were not prepared to receive an order for 1,000 Visian ICLs that had been manufactured for them. This order has now shipped and the revenue has been recorded in the third quarter. The second factor was an increase beyond expected demand for certain pre-loaded silicone IOL models. We finished the quarter with about 4,000 IOLs on backorder. We currently expect to achieve double digit core product line growth in the third quarter and for the full year," Mr. Caldwell added.
"We continued to make progress during the quarter on our plan to generate increased shareholder value," continued Mr. Caldwell. "We accomplished several key objectives toward this end including:
- Repaying the $5.0 million Broadwood promissory note early and retiring 1.7 million of preferred shares at a cost of $4 per share. We also paid the $4.0 million litigation settlement obligation. These payments represented a total cash outlay of over $16 million, including interest and expense, during the quarter. Interest in the second half of the year is expected to be reduced by approximately $530,000 as the quarterly expense charge should be approximately $50,000 during the second six month period.
- Initiating our new "go to market" organizational structure designed to provide more focus on key market growth in three regional areas. We are starting to see the benefits and anticipate enhanced results as we expand our leadership team and focus.
- In the U.S. we implemented a planned increase in personnel to accelerate revenue growth. As of today, we have added five new direct sales representatives selling core products and two new marketing associates focusing on the professional and consumer market segments for the Visian ICL products.
- Gaining approval for an expanded Visian ICL product offering in European markets, which effectively doubles the available market opportunity there. Launch of the approved products is on track for September. Our sales team and distributors were trained on the product last month.
- The response to the FDA on the Company's submission for approval of the Visian Toric ICL has been submitted and the Company expects to have a face-to-face meeting with FDA in the coming weeks.
Recent Visian Implantable Collamer® Lens (ICL) Highlights
- Second quarter 2010 global Visian ICL sales increased 9% to $5.9 million from $5.4 million for the second quarter of 2009. Total unit volume increased 6% during the quarter and average selling prices increased by 2% as a result of an increase in Visian Toric ICL sales.
- The Visian Toric ICL, which is available in 45 markets, accounted for 44% of ICL sales in those markets during the quarter as compared to 34% for the second quarter of 2009. Visian Toric sales in those markets increased by 48% during the quarter.
- In Korea, revenues for the Visian ICL products decreased 28% during the second quarter of 2010 as compared to the prior year second quarter due to shipments that were delayed into Q3 concurrent with the opening of a new ICL distribution center. Korea is one of the few markets where STAAR's distributors carry inventory. Their shipments to customers for implantation increased by 34% during the quarter.
- In the U.S., which is still the largest refractive surgery market, Visian ICL sales decreased 6% due to continued negative trends in the overall growth rate of refractive procedures.
- Other key markets continued to demonstrate strong growth as they did during the first quarter including:
- In China, which is the fourth largest ICL market and second largest refractive surgery market, revenues grew by 123% compared to the second quarter of 2009 and 98% during the first half of the year.
- India recorded a 77% ICL growth rate during the second quarter and was the product line's fifth largest market during the period. Sales there for the first half of the year increased by 44%.
- There is also a group of markets emerging which create an opportunity for expanded growth this year. These markets demonstrated good growth during the quarter and have increased at higher than double-digit rates for the first half of the year. For the quarter: Spain increased 30%, the Middle East increased 62%, Singapore 182%, France 39% and the United Kingdom 136%.
- In Japan the Company has gotten off to a slower-than-expected start due to the current requirements for proctoring of new physicians. Revisions to the process are anticipated to allow for a quicker and easier training cycle.
- As noted above, during the quarter the Company received approval to sell an expanded range of Visian ICL products, which more than doubles the current Visian-addressable market in Europe. Included in the CE Mark approval was the STAAR Hyperopic Toric ICL, which is designed for patients with both hyperopia and astigmatism.
Recent Intraocular Lens (IOL) Highlights
- Second quarter 2010 global IOL sales increased to $7.0 million a 5% increase from the second quarter of 2009 due to increased average selling prices. As previously noted, the quarter ended with 4,000 IOLs in backorder.
- Global nanoFLEX™ IOL sales increased 15%. Preloaded IOL sales increased by 12% driven by the launch of the KS-X Hydrophobic Acrylic Preloaded IOL to expand market presence.
- France again led in IOL market increases for the Company during the second quarter. Sales in France increased more than fourfold during the quarter.
- Overall IOL sales in Europe increased by about 35% for the quarter and about 80% for the first half of the year.
- Despite continued pricing pressures in Japan, IOL sales grew 8.5% over the second quarter of 2009.
- In the U.S., overall IOL sales declined by 7% due to decreased sales of lower priced silicone IOLs. This decline was offset somewhat by an 11% increase in average selling price driven by a 17% increase in nanoFLEX™ IOL sales. This change in product mix helped to increase gross margins in the U.S. by 350 basis points.
- The second submission of the clinical protocol for the CAST II study was submitted to the FDA over 60 days ago and the Company awaits a pending response from FDA.
Second Quarter Financial Highlights