Micrus Endovascular reports financial results for three and nine months ended December 31, 2009

Micrus Endovascular Corporation (Nasdaq: MEND) today reported financial results for the three and nine months ended December 31, 2009 and raised fiscal 2010 revenue guidance.

“Products we introduced in the past 24 months represented 28% of total 2010 fiscal third quarter revenues. The largest contribution came from our bare platinum and Cerecyte® DeltaPaq™ filling microcoils, comprising 18% of third quarter revenues with sales coming from both existing and competitive accounts.”

Highlights for the third quarter and first nine months of fiscal 2010 include the following (all comparisons are with the comparable periods for fiscal 2009):

• Total revenues increased 24% for the third quarter (or 20% in constant currencies) compared with the same period last year
• Total neurovascular revenues increased 26% (or 22% in constant currencies) to a record $22.8 million for the third quarter, and increased 16% (also 16% in constant currencies) to $65.5 million for the first nine months
• Neurovascular revenues from the United States increased 15% to $11.0 million for the third quarter, and increased 15% to $32.3 million for the first nine months
• Revenues from the Americas increased 16% to $12.6 million for the third quarter, and increased 10% to $36.1 million for the first nine months
• Revenues from Europe increased 31% (or 18% in constant currencies) to $7.4 million for the third quarter, and increased 16% (or 18% in constant currencies) to $20.2 million for the first nine months
• Revenues from Asia Pacific increased 50% to $2.8 million for the third quarter, and increased 26% to $9.3 million for the first nine months
• Operating income was $3.4 million for the third quarter, compared with an operating loss of $1.7 million for the prior-year period; operating income for the first nine months was $7.4 million, compared with an operating loss of $10.6 million for the prior-year period
• Cash and cash equivalents as of December 31, 2009 were $28.6 million, up $11.6 million from March 31, 2009

Net income for the third quarter of fiscal 2010 was $3.3 million, or $0.20 per diluted share on 16.8 million weighted-average shares outstanding, and included $1.5 million or $0.09 per diluted share of non-cash stock-based compensation expense. The net loss for the third quarter of fiscal 2009 was $2.3 million, or $0.15 per share on 15.7 million weighted-average shares outstanding, and included $1.2 million or $0.08 per share of non-cash stock-based compensation expense.

“We are proud to report another quarter of record revenues, up 24% over the prior year with double-digit revenue growth in all of our major geographic regions. For the third quarter of fiscal 2010 compared with the same period in fiscal 2009, our neurovascular sales increased 15% in the highly competitive U.S. market, 31% in Europe and 50% in Asia Pacific. Based on this strong performance, we are raising revenue guidance for fiscal 2010,” said John Kilcoyne, Chairman and CEO of Micrus Endovascular Corporation. “We continue to grow our top line while effectively managing expenses, resulting in our fourth consecutive quarter of profitability and positive cash flow from operations. We increased our cash position by $11.6 million during the first nine months of this fiscal year, including a $4.5 million increase in the fiscal third quarter.

“I am pleased to announce that we have recently launched our DeltaPlush™ finishing microcoils in bare platinum and Cerecyte^® versions in North and South America and Europe, which we expect will substantially improve our competitive position in the finishing segment of the coil market. We have also launched our Ascent^® occlusion balloon catheters, a new product category for Micrus which represents another incremental revenue opportunity,” he added. “Products we introduced in the past 24 months represented 28% of total 2010 fiscal third quarter revenues. The largest contribution came from our bare platinum and Cerecyte^® DeltaPaq™ filling microcoils, comprising 18% of third quarter revenues with sales coming from both existing and competitive accounts.”

Fiscal Third Quarter Financial Results

For the third quarter of fiscal 2010, total neurovascular revenues were $22.8 million, up 26% from the comparable prior-year period. Gross margin for the third quarter of fiscal 2010 was 76%, compared with 74% for the third quarter of fiscal 2009. The improvement was primarily due to increased sales of higher-margin products.

Research and development expenses for the third quarter of fiscal 2010 were $2.1 million, down from $2.4 million for the comparable prior-year period. The decrease was primarily due to lower headcount and a decline in materials and supplies expenses, partially offset by an increase in consulting fees and product testing.

Sales and marketing expenses for the third quarter of fiscal 2010 were $6.4 million, down from $6.9 million for the third quarter of fiscal 2009. The decrease was primarily due to lower travel and personnel expenses, a decrease in meeting and conference costs and lower consulting fees, partially offset by an increase in sales incentives resulting from the higher level of sales.

General and administrative expenses for the third quarter of fiscal 2010 were $5.4 million, down from $5.9 million for the comparable prior-year period. The decrease is primarily due to lower legal and professional fees.

Operating income for the third quarter of fiscal 2010 was $3.4 million, compared with an operating loss of $1.7 million for the third quarter of fiscal 2009.

Other income, net, was $25,000 for the third quarter of fiscal 2010, compared with other expense, net, of $1.0 million for the third quarter of fiscal 2009, due to losses resulting from the remeasurement of foreign currency transactions in the third quarter of fiscal 2009.

Year-to-Date Financial Results

For the nine months ended December 31, 2009, total neurovascular revenues were $65.5 million, up 16% from the comparable prior-year period, reflecting higher sales of microcoil products. Gross margin for the first nine months of fiscal 2010 was 76%, compared with 74% for the first nine months of fiscal 2009. Operating expenses for the first nine months of fiscal 2010 were $42.1 million, down from $53.1 million for the prior-year period. Operating income for the first nine months of fiscal 2010 was $7.4 million, compared with an operating loss of $10.6 million for the prior-year period. Other income, net, was $2.6 million for the nine months ended December 31, 2009, which included the recognition of a deferred gain of $1.9 million in connection with the sale of non-neurological assets to Merit Medical Systems, Inc. in January 2008. Other expense, net, was $1.7 million for the nine months ended December 31, 2008.

Net income for the nine months ended December 31, 2009 was $9.2 million, or $0.56 per diluted share on 16.4 million weighted-average shares outstanding. Net income included $4.8 million or $0.29 per share of non-cash stock-based compensation expense. This compares with a net loss of $11.6 million, or $0.74 per share on 15.7 million weighted-average shares outstanding, for the comparable prior-year period. The net loss included $4.3 million or $0.27 per share of non-cash stock-based compensation expense.

As of December 31, 2009, Micrus had cash and cash equivalents of $28.6 million, stockholders’ equity of $59.2 million and working capital of $41.6 million. As of December 31, 2009, Micrus had outstanding borrowings of $2.5 million under its line of credit, unchanged from March 31, 2009.

Use of Non-GAAP Financial Information

A reconciliation of the Company’s non-GAAP financial measures to the corresponding GAAP measures, and an explanation of the use of non-GAAP measures, is included at the end of this news release. There are limitations in using this non-GAAP financial measure because it is not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies. These non-GAAP financial measures should not be considered in isolation or as a substitute for GAAP financial measures. Investors and potential investors should consider non-GAAP financial measures only in conjunction with the Company’s consolidated financial statements prepared in accordance with GAAP and the reconciliation of the non-GAAP financial measures provided in the attached schedule.

Fiscal Year 2010 Financial Guidance

Micrus Endovascular raised its expectation for total revenues in fiscal 2010 to be in the range of $87 million to $89 million. This compares with prior guidance for total revenues to be in the range of $84 million to $87 million.