BioSphere Medical reports fourth-quarter and full-year 2009 results

BioSphere Medical, Inc. (NASDAQ: BSMD) (“BioSphere” or the “Company”) – the pioneer in the use of bioengineered microspheres to treat uterine fibroids, hypervascularized tumors and vascular malformations by a minimally invasive, image-guided medical procedure called embolotherapy – today reported financial results for the three and 12 months ended December 31, 2009. Highlights of the fourth quarter of 2009 and subsequent weeks include:

• Net loss per share was $0.02 for the fourth quarter of 2009, sharply narrowed from a net loss per share of $0.09 for the fourth quarter of 2008
• Total worldwide revenue was $8.36 million for the fourth quarter of 2009, an increase of 16% over the same period in 2008
• Total U.S. revenue was $6.10 million, up 3% over the same period in 2008
• Total outside the U.S. (OUS) revenue was $2.26 million, an increase of 69% over the same period in 2008
• BioSphere filed an Investigational Device Exemption (IDE) in October 2009 with the U.S. Food and Drug Administration (FDA) and continues to work with the FDA on finalizing the related clinical study protocol for a planned pivotal trial of its QuadraSphere® Microspheres loaded with doxorubicin for the treatment of primary liver cancer
• BioSphere conducted 51 Community Health Talks (CHTs) in partnership with hospitals and interventional radiologists to raise awareness among targeted patients of uterine fibroid embolization (UFE) as a treatment option for women with symptomatic fibroids

Commentary

Richard Faleschini, BioSphere’s president and chief executive officer, said, “In the fourth quarter of 2009, we saw significant growth in the sale of our products used by interventional radiologists to treat primary liver cancer. The 68% worldwide increase in sales was, we believe, due largely to continued publications and podium presentations by thought leaders of the results of their independent work in the use of our embolics, both bland and drug eluting, for the treatment of liver cancer. We are working closely with the FDA to obtain an approval for our IDE for a planned pivotal study using QuadraSphere Microspheres loaded with doxorubicin for the treatment of primary liver cancer. The worldwide annual incidence of hepatocellular carcinoma, or HCC, is more than 600,000, half of which cases are in China, and 20,000 of which occur in the U.S. Based on the current scientific literature, we expect the incidence of HCC to increase significantly in the next ten years. The current market size and our expectations of growth in incidence make the liver cancer market a key opportunity for BioSphere. Assuming FDA approves our pivotal trial, we expect to treat approximately 200 patients at 16 sites in the U.S., EU, and Brazil, and the study will compare QuadraSphere Microspheres loaded with doxorubicin with conventional transarterial chemoembolization with doxorubicin, which is the current standard of care. If the trial is successful, and we obtain a premarket approval, or PMA, from the FDA, we expect that QuadraSphere Microspheres would be the first FDA-approved device to treat hepatocellular carcinoma using drug-eluting chemoembolization, which we believe has the potential to be a significant value-creating event for BioSphere.”

Mr. Faleschini continued, “In the fourth quarter of 2009, we continued to scale up Community Health Talks (CHTs) in the U.S., which we believe can increase UFE procedures over time. In the quarter we conducted 51 CHTs, up from 39 in the third quarter. A total of 119 CHTs were held in 2009, 75 of which were conducted after mid September. On average, our studies indicate that there is a lag of five to eight months between when a woman attends a CHT and has a UFE procedure done, if she elects to have a UFE. Thus, UFE sales improved in Q4 compared to Q3, but did not reach or exceed our high point achieved in Q2. We expect that the full impact of 2009’s CHTs should be felt more throughout the first half of this year. We believe CHTs can help to countervail the adverse impact that the bad economic climate and consequential high rates of unemployment and lapsing health insurance have had on UFE in the U.S. Consequently, we plan to more than double the number of CHTs in 2010 compared with 2009, and as we continue to ramp up, they should have a positive compounding effect going forward, assuming no further deterioration of the U.S. economy. Moreover, on average, CHTs are cost effective to run and yield more UFE procedures per dollar spent compared with other direct-to-patient marketing programs. So, over time our marketing spend should get more efficient if current metrics hold as we scale up these activities,” he concluded.

Financial Results

Total worldwide revenue for the fourth quarter of 2009 was $8.36 million, an increase of 16%, compared with $7.24 million for the fourth quarter of 2008. Worldwide revenue from sales of embolics and delivery systems for the fourth quarter of 2009 was $8.27 million, up 17% from $7.10 million in the prior year. Revenue from licensing and the Nippon Kayaku distribution agreement was $0.09 million, compared to $0.10 million in the same period last year.

U.S. sales of embolics and delivery systems were $6.09 million in the fourth quarter of 2009, up 5% from $5.79 million in the fourth quarter of 2008. Revenue from embolics and delivery systems in Europe, the Middle East and Africa (EMEA) in the fourth quarter of 2009 was $1.49 million, an increase of 39% (24% in local currency), compared with $1.07 million for the same period in 2008. The EMEA results for the fourth quarter of 2009 include distributor stocking orders of approximately $0.30 million from the required prenotification in our distributor agreements of a HepaSphere™ Microsphere price increase, which took effect in January 2010. In emerging markets outside of the United States and EMEA, product revenue was up approximately threefold, to $0.69 million for the fourth quarter of 2009, compared with $0.23 million for the same period in 2008. The People’s Republic of China and Brazil accounted for much of the increase, with combined revenues of $0.55 million, compared with $0.12 million in the comparable quarter last year.

Gross profit rose to $6.29 million, or 75.2% of revenue, for the fourth quarter of 2009, compared with gross profit of $5.47 million, or 75.6% of revenue, for the fourth quarter of 2008. The slight decline in gross profit margin reflects a mix shift to lower gross margin OUS sales compared with the same quarter last year.

Operating expense for the fourth quarter of 2009 was $6.77 million, compared with $7.05 million for the fourth quarter of 2008. Lower operating expense was primarily due to a significant reduction in U.S. marketing expense as the Company shifted tactics to more efficient local marketing programs from national direct-to-consumer campaigns. Research and development expense was also lower, as a milestone charge under the Company’s agreement with DuPont of $0.20 million recorded in Q4 2008 was not incurred in Q4 2009.

Operating loss for the fourth quarter of 2009 declined significantly, to $0.49 million from $1.58 million in the same period of 2008, a drop of 69%.

Foreign exchange gain for the fourth quarter of 2009 was $0.14 million compared with $0.05 million for the same period last year due to the strengthening of the U.S. dollar against the euro, which creates a translation benefit for the Company’s euro-denominated intercompany accounts.

The Company recorded an income tax benefit of $0.05 million in the fourth quarter of 2009 from the French economic stimulus program.

The quarterly preferred stock dividend for the fourth quarter of 2009 was $0.15 million, unchanged from the fourth quarter of 2008.

Net loss applicable to common stockholders in the fourth quarter of 2009 was $0.44 million, or $0.02 per share, improved 74% compared with a net loss applicable to common stockholders in the same period last year of $1.68 million, or $0.09 per share.

As of December 31, 2009, BioSphere had cash, cash equivalents and marketable securities of $18.01 million, compared with $18.24 million as of December 31, 2008. During the fourth quarter of 2009, BioSphere used only $0.48 million of cash, nearly operating cash flow break even.

Sales by therapeutic area in the fourth quarter of 2009 were as follows:

• Worldwide sales of embolics used in interventional gynecology, or UFE, were $5.74 million, up 4% over $5.55 million in the fourth quarter of 2008, which includes U.S. sales of $4.71 million, an increase of 1%, and sales outside of the U.S. of $1.03 million, an increase of 17%.
• Worldwide sales of embolics used in interventional oncology rose 68% to $2.23 million compared with the fourth quarter of 2008, which includes U.S. sales of $1.20 million, an increase of 21%, and sales outside of the U.S. of $1.03 million, an increase of 209%, with the bulk of this increase coming from the People’s Republic of China, Brazil, and from distributors’ stocking orders in anticipation of a HepaSphere Microsphere price increase in Europe.
• Worldwide sales of delivery systems were $0.30 million, compared with $0.23 million in the fourth quarter of 2008, which includes U.S. sales of $0.18 million and sales outside of the U.S. of $0.11 million.

For the year ended December 31, 2009, total revenue was $31.44 million, compared with $29.26 million in the prior-year period, an increase of 7%. Full-year 2008 revenue includes $0.82 million of phased-out gastric product revenue. Excluding gastric products, revenue for 2009 increased 11%. Net loss applicable to common stockholders in 2009 was $3.25 million, or $0.18 per share, compared with $6.07 million, or $0.34 per share, in 2008.