Cardica reports net loss of $3.0 million for third-quarter fiscal 2010

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Cardica, Inc. (Nasdaq: CRDC) today announced financial results for its fiscal third quarter and nine months ended March 31, 2010. Cardica's management will host a conference call at 4:30 p.m. Eastern Time to discuss the financial results and provide an update on the company's business.

"During the fiscal third quarter, we continued development of the Cardica Microcutter product line, initiated animal trials for the Cardica Microcutter ES8 and, subject to FDA clearance under a 510(k) process, we believe we are on track to launch the Cardica Microcutter ES8 in early calendar 2011," said Bernard A. Hausen, M.D., Ph.D., president and chief executive officer of Cardica. "We believe this line of products, which will include flexible and rigid shaft offerings in multiple sizes for use in a wide variety of laparoscopic or thorascopic procedures, provides a technological improvement for surgeons with cutting-stapling devices that are smaller, easier to use, and more flexible than existing products."

"For our cardiac surgery business, we maintained a revenue rate of approximately $1 million and are beginning to see usage from new accounts that are pursuing totally endoscopic coronary artery bypass (TECAB) procedures," continued Dr. Hausen. "Moving forward, we expect steady and sequential growth in sales of our automated anastomosis products."

Recent Highlights and Accomplishments

  • Increased cumulative worldwide shipments of PAS-Port® Proximal Anastomosis Systems to over 18,000 units, with 925 units shipped in the fiscal 2010 third quarter;
  • Increased cumulative worldwide shipments of C-Port® Distal Anastomosis Systems to over 10,400 units, with 412 units shipped in the fiscal 2010 third quarter;
  • Announced the first peer-reviewed publication demonstrating short- and medium-term patency using our C-Port systems to connect arterial grafts during beating-heart bypass procedures;
  • Initiated animal testing for the Microcutter product line; and
  • Began design of the Cardica Microcutter MES5 and FES5, cutting-stapling devices with a five millimeter shaft diameter.

Dr. Lee Swanstrom, a leading laparoscopic and general surgeon at The Oregon Clinic commented, "A stapling platform like the Cardica Microcutter, that is less than 12 millimeters in diameter, allows 'reload on the fly' and has the potential to be flexible, provides substantial technological advances over existing devices. I believe it has the potential to open the door to a new generation of even less invasive surgeries such as endoluminal endoscopic surgery and Natural Orifice Transluminal Endoscopic Surgery (NOTES)."

Feedback from surgeons, such as Dr. Swanstrom, has confirmed that the potential benefits offered by the Cardica Microcutter will meet unmet needs of surgeons who are continuing to advance minimally invasive techniques.

Fiscal 2010 Third Quarter and Nine Months Ended March 31, 2010 Financial Results

Total product sales were approximately $1.0 million for the fiscal 2010 third quarter compared to $2.1 million for the same period of fiscal 2009. Net product sales decreased primarily as a result of Cardica's smaller direct sales force. Because the development of the patent foramen ovale (PFO) closure device under the relationship with Cook Medical was put on temporary hold during the fiscal 2010 second quarter, no development revenue was recorded during the fiscal 2010 third quarter. Development revenue was $728,000 for the fiscal 2009 third quarter. Total net revenue was approximately $1.0 million for the fiscal 2010 third quarter compared to $2.8 million for the fiscal 2009 third quarter. Cost of product sales was approximately $1.1 million for the fiscal 2010 third quarter compared to $1.5 million in the same period of fiscal 2009 and was negatively affected by overhead costs spread over fewer units produced.

Research and development expenses were approximately $1.4 million for the fiscal 2010 third quarter compared to $1.9 million for the fiscal 2009 third quarter. Selling, general and administrative expenses for the fiscal 2010 third quarter were approximately $1.5 million compared to $3.3 million for the comparable quarter of 2009. The lower expenses in the fiscal third quarter of 2010 are primarily due to the actions taken in fiscal 2009 to change Cardica's sales approach to a more variable cost model and to lower Cardica's headcount.

The net loss for the fiscal 2010 third quarter was approximately $3.0 million, or $0.12 per share, compared with a net loss of approximately $3.9 million, or $0.25 per share, for the fiscal 2009 third quarter.

Total net revenue for the nine months ended March 31, 2010, was approximately $3.0 million compared with approximately $7.9 million for the same period of fiscal 2009.  Total operating costs and expenses for the nine months ended March 31, 2010 were approximately $10.8 million compared with approximately $21.7 million for the same period of 2009. The net loss for the first nine months of fiscal 2010 was approximately $7.9 million, or $0.37 per share, compared to $13.8 million, or $0.87 per share, for the same period of fiscal 2009.

Cash and cash equivalents at March 31, 2010 were approximately $9.3 million compared with $11.1 million at December 31, 2009 and $5.3 million at June 30, 2009.  As of March 31, 2010, there were approximately 24 million shares of common stock outstanding. At the beginning of April, Cardica restructured its outstanding note agreement with Century Medical. Cardica made a principal payment of $600,000 to Century Medical in April 2010, with the remaining $1.4 million outstanding due in June 2011, one year later than the maturity date prior to the revised agreement.

Financial Guidance for Fiscal 2010

Cardica continues to be in a transition period for its cardiac surgery business and is not able to provide product sales guidance for fiscal 2010. For fiscal 2010, Cardica expects that research and development and selling, general and administrative expenses will total between $10 million and $11 million, including non-cash stock-based compensation expense of approximately $1.5 million. Cardica continues to expect its cash and cash equivalents to decline by approximately $2.5 million per quarter in fiscal 2010, without giving effect to any additional financing transactions that may occur.

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