Somanetics first-quarter 2010 net revenues up 18%

First Quarter Highlights

• Net revenues of $13.1 million, up 18 percent.
• Income before income taxes of $3.1 million, up 45 percent.
• Net income of $2.0 million, up 57 percent; $0.16 per diluted share.
• Somanetics adjusts full-year guidance to net revenues increasing 12 to 15 percent over 2009 to approximately $56 million to $57.5 million, and operating margin to be approximately 17 to 20 percent, excluding litigation expense.

Somanetics Corporation (Nasdaq: SMTS) reported net revenues of $13.1 million for the first quarter ended February 28, 2010, an 18 percent increase from $11.2 million in the same period of 2009.  

U.S. net revenues increased 20 percent to $10.5 million from $8.7 million in the same period last year.  International net revenues increased 11 percent to $2.7 million from $2.4 million.

First quarter income before income taxes was $3.1 million, compared to $2.1 million for the first quarter of 2009.  Net income was $2.0 million, or $0.16 per diluted share, compared with net income of $1.3 million, or $0.10 per diluted share, in the first quarter of 2009.

Gross margin was 87 percent in the first quarter, compared with 86 percent in the first quarter of 2009.  As of February 28, 2010, Somanetics' cash, marketable securities and long-term investments balance was $76.8 million, with no borrowings.  

In the first quarter Somanetics purchased 401,992 common shares pursuant to its stock repurchase plan for approximately $6.4 million including commissions.  Somanetics has approximately $7.1 million remaining under its $45 million stock repurchase program.

"We are off to a solid start for the year with sales and earnings exceeding our internal plans for the first quarter," said Bruce Barrett, Somanetics' president and chief executive officer.

"We also are continuing to execute our investments to increase the size of our U.S. field sales and clinical education team and implement technological advances that promise to further our lead in this developing marketplace."

Company to Participate in Upcoming Medical Conferences

Somanetics will participate in approximately 20 medical conferences during the second quarter, including the 2010 annual meeting of the American Association for Thoracic Surgery and various regional and state cardiothoracic, perfusion, anesthesia, pediatric cardiac and neonatology association meetings.  At the International Anesthesia Research Society (IARS) meeting this month, a number of abstracts will be presented on the use of the INVOS System in cardiac and carotid endarterectomy surgery.  

At the Anesthesia Patient Safety Foundation's Excellence in Safety Research Symposium, being held in conjunction with the IARS, John Murkin, MD will receive the "Excellence in Device Innovations" award and speak on the topic of Clinical Uses of Non-Invasive Cerebral Oximetry.

New Clinical Data Published

In January, Sean Bailey, MD and colleagues from New York University School of Medicine published study results in the American Journal of Perinatology.  They studied cerebral and somatic regional saturation of oxygen (rSO2) using the INVOS System before and after transfusion of packed red blood cells (PBRCs) and found that transfusions of PBRCs in anemic preterm infants were associated with significant increases in both cerebral and splanchnic (abdominal) oxygen saturation, an indication of increased oxygen delivery.  Additionally, neither cerebral nor splanchnic (abdominal) rSO2 correlated with hemoglobin concentration in the blood, a relatively insensitive marker that is sometimes used to evaluate the need for transfusion.  Because there currently is no universal method for determining when a transfusion is necessary, the study highlights the importance of monitoring organ perfusion as a means of evaluating the benefits of transfusion in this population.  These results were essentially the same as those of Carlo Dani, MD and colleagues at Careggi University Hospital in Florence, Italy, whose publication in the journal Transfusion appeared at the same time.

In addition, Somanetics expects other articles will be published in the next few months, on such topics as the establishment of rSO2 baseline values for cerebral, peri-renal and abdominal monitoring in neonates and the management of surgical neonatal patients with necrotizing enterocolitis.  

"We believe that peer-reviewed articles will continue to build the foundation of clinical evidence of the benefits of using the INVOS Cerebral/Somatic Oximeter in the neonatal ICU," Barrett said.  

Technological Advances

Somanetics has developed a sensor for use in the neonatal ICU that has features that are important to the customers including a smaller size, more flexibility and a lighter weight than the current model.  The sensor is expected to be introduced to customers beginning in the second quarter.  

Work is continuing on the development of a single integrated INVOS System and Vital Sync System device for bedside data collection, storage, display and analysis.  In addition, pursuant to the rights Somanetics recently obtained to new cerebral autoregulation technology developed at The Johns Hopkins University, Somanetics is working on the integration of the technology into the INVOS System, which would yield the first noninvasive monitor providing cerebral autoregulation data for routine clinical use.  

Business Outlook

Based on its first quarter results and the current outlook for the year, Somanetics is adjusting its financial guidance for fiscal year 2010.  Somanetics is currently forecasting:

• Fiscal 2010 net revenues increasing 12 to 15 percent over 2009 to approximately $56 million to $57.5 million; Somanetics previously guided to revenue growth of 12 percent.
• Gross margin of approximately 87 percent and operating margin of approximately 17 to 20 percent, excluding litigation expense; Somanetics previously guided to gross margin of approximately 87 percent and operating margin of approximately 17 percent, excluding litigation expense.  

Current estimates are based on market and economic conditions, including the assumption that the recovery in capital spending at hospitals will be slow to develop.  These estimates reflect management's plan to invest in the clinical research, medical education and research and development projects focused on the pediatric and neonatal ICU markets, the development of new technologies and the addition of employees in sales, research and development and administration.  Somanetics undertakes no obligation to update its estimates.  

SOURCE Somanetics Corporation