Sep 2 2009
Synovis Life Technologies, Inc. (NASDAQ: SYNO), today reported record revenue for the third quarter ended July 31, 2009.
For the 2009 fiscal third quarter, net revenue rose to $15.0 million, a 12 percent increase over $13.4 million in the year-ago period. Net loss on a GAAP basis for the third quarter of fiscal 2009 was $(4.9) million, or $(0.42) per share. Adjusted third quarter net income (non-GAAP), excluding certain special charges, was $2.2 million, or $0.19 per diluted share, up 24 percent from GAAP net income of $1.8 million, or $0.14 per diluted share, in the year-earlier period.
Synovis recorded several special charges in the third quarter, which totaled $8.2 million on a pretax basis and $7.1 million on an after-tax basis, or $0.61 per diluted share. These charges include: the other-than-temporary impairment of $4.1 million in auction rate securities; the immediate expensing of $3.5 million of acquired in-process research and development projects related to the purchase of the assets of Pegasus Biologics; and the write-off of $600,000 of intangibles related to a lower priority product. (See reconciliation table on page 6 for details.)
Richard W. Kramp, Synovis Life Technologies’ president and chief executive officer, said, “The accomplishments of this just-completed third quarter were significant and very important for the near- and long-term growth of Synovis. First, we again posted double-digit revenue gains and realized the 12th record revenue quarter in the last 13 quarters. Second, we are about to complete a 40 percent increase in our domestic direct sales force for our surgical products. And third, we have expanded our soft tissue technology base and regulatory approvals into the orthopedic and wound care markets with the acquisition of the assets of Pegasus Biologics. These achievements promise to increase returns to our shareholders for years to come and were accomplished with very modest investments. The Pegasus transaction brought products with full regulatory approval in the United States, as well as Europe, in the expanding orthopedic and wound care markets. The acquired technology provides a collagen matrix for soft tissue repair which completes the spectrum between our tightly cross-linked Apex technology and our non-cross linked, remodelable Veritas® technology.”
Known as “flexible cross-linking”, the Pegasus Biologics technology binds the potential antigenic sites in the collagen matrix to each other with a long chain, bio-compatible molecule preserving the natural mechanical characteristics of the material while also leaving larger spaces between the crosslinks to allow native tissue integration. This technology is particularly suited to wound healing and orthopedic applications.
Kramp added, “The 14 additional sales professionals hired in the fiscal third quarter and early August for our surgical sales force have begun our intensive training program. We expect to fill the two remaining sales positions in the coming weeks and will then have a total of 56 territory sales representatives and seven regional managers in place for fiscal 2010. Past additions of territory sales representatives have led to greater market penetration and higher revenue approximately six months after the expansion.”
Gross margin for the fiscal third quarter rose to 72 percent, a 3 percentage point gain over the third quarter of fiscal 2008. Most of the gross margin improvement resulted from increased sales of higher margin Veritas products, improved labor and material utilization, and higher average net selling prices. SG&A expenses rose 22 percent over the third quarter of fiscal 2008 due primarily to investments in the expansion of the surgical sales force, expenses related to the start-up of the assets acquired from Pegasus and increased legal costs. Research and development expenses totaled $945,000 in the third quarter, a 12 percent increase over the year-ago period. Priority projects included the final-stage development of the Flow Coupler, Peri-Strips® enhancement initiatives, and work on current and future Veritas indications. On a GAAP basis, the operating loss for the third quarter of fiscal 2009 totaled $(1.7) million. Adjusted operating income (non-GAAP) for the third quarter totaled $2.4 million, a 7 percent gain over GAAP operating income of $2.3 million a year earlier.
In the first nine months of fiscal 2009, net revenue rose to $43.2 million, up 16 percent from $37.1 million in the prior-year period. On a GAAP basis, the net loss for the first nine months of fiscal 2009 totaled $(1.1) million. Adjusted net income (non-GAAP) was $5.9 million, or $0.50 per diluted share, up from GAAP net income from continuing operations of $4.3 million, or $0.33 per diluted share, in the first nine months of fiscal 2008.
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