EDAP's gross profit reduces 5.1% in 2010 second quarter

• Maintained robust cash position of EUR 11.4 million (USD 14.0 million) at June 30, 2010
• Raised visibility for positive long-term European experience of Ablatherm®-HIFU with four abstracts presented at American Urological Association (AUA)
• Entering patient follow-up phase after completing enrollment in U.S. ENLIGHT Ablatherm-HIFU clinical trial
• Increasing global sales opportunities with receipt of European approval for Sonolith i-move and Japanese approval for Sonolith i-sys
• Enhancing U.S. lithotripsy market potential with submission of 510(k) marketing clearance application to U.S. FDA for Sonolith i-move
• Strengthening third quarter lithotripsy machine backlog with nine machines in pipeline to date
• Entered exclusive agreement with Lumenis to distribute state-of-the-art urological lasers in France

EDAP TMS SA (Nasdaq:EDAP), the global leader in therapeutic ultrasound, announced today financial results for the second quarter ended June 30, 2010. The Company outlines strategic initiatives to counter the continuing weak global economic climate.

Marc Oczachowski, EDAP's Chief Executive Officer, commented, "Our second quarter results reflected the overall weak global economic environment and the resulting slowdown in hospital capital expenditures. In the face of these trends, we are undertaking several initiatives to broaden the market opportunities for our medical device portfolio. We are actively pursuing efforts for the clinical recognition of Ablatherm-HIFU for the treatment of localized prostate cancer. During the second quarter, four abstracts that outlined the long-term positive European experience were presented at the American Urological Association (AUA) 2010 Annual Meeting. The data confirmed that EDAP's lifestyle preserving Ablatherm treatment is on par with other more invasive treatment options, such as surgery or radiotherapy. Simultaneously, we are undertaking marketing initiatives to position HIFU as an alternative treatment for prostate cancer patients that did not respond to radiation treatments."

Mr. Oczachowski continued, "Prostate cancer treatment is currently going through a re-definition as the treatment approach transitions from a radical approach to a focal therapy approach that features focused treatment at the identified prostate cancer location.  Due to its precision, accuracy and repeatability, EDAP's Ablatherm-HIFU is most advantageously positioned to address the focal therapy approach as it is being defined by the International Urology Community.  We believe that the focal therapy approach represents a unique opportunity for Ablatherm HIFU to become the gold standard of treatment for prostate cancer. We at EDAP want to seize this tipping point opportunity and are now putting in place actions and plans to achieve this goal."

Mr. Oczachowski concluded, "Turning to our established lithotripsy franchise, EDAP continues to move forward with the rollout of its expanded product portfolio. In April 2010 at the European Associate Urology Congress, EDAP launched the Sonolith i-move, a compact, stand-alone lithotripter with a revolutionary infrared stereo-vision system for real-time, three-dimensional ultrasound localization of urinary stones. Following European approval, we sold two Sonolith i-move devices during the quarter. Our high-end Sonolith i-Sys lithotripsy device received Japanese approval in March 2010. We received our first sale in Japan in the weeks following approval and continue to cultivate positive sales leads that we should be able to convert in the coming months. Since the end of the second quarter 2010, the Company has built a strong promising backlog of nine lithotripsy systems, including four recently launched Sonolith i-move systems."

Other Recent Developments

In June 2010, EDAP entered an exclusive agreement with Lumenis to distribute its high-technology urological lasers in France. Lumenis markets leading lasers that enable precise minimally invasive treatment for a wide array of urologic conditions such as benign prostatic hyperplasia (BPH) and bladder, urethral and kidney stones. These products are a natural, synergistic expansion of EDAP's product portfolio.

In July 2010, patient enrollment was completed in the Company's U.S. ENLIGHT Ablatherm-HIFU clinical trial, a multi-center Phase II/III clinical trial under an Investigational Device Exemption granted by the FDA, and the Company entered the required two-year follow-up phase. In aggregate, 134 patients participated in the U.S. study.

In August 2010, EDAP filed its application for 510(k) marketing clearance with the U.S. FDA for its compact, multi-configurations Sonolith i-move lithotripsy device. Following receipt of FDA marketing clearance, EDAP should be well positioned to address all segments of the U.S. lithotripsy market offering the widest product range spanning compact to fully integrated devices.

Quarterly Results

Revenue for the second quarter 2010 was EUR 6.0 million (USD 7.6 million), compared to EUR 6.8 million (USD 9.4 million) for the second quarter 2009.

Total revenue for the HIFU division was EUR 1.9 million (USD 2.4 million) for the second quarter 2010, compared to EUR 2.2 million (USD 3.0 million) for the same period last year. Results for the second quarter 2010 reflected the sale of one Ablatherm-HIFU machine.

For the three months ended June 30, 2010, total revenue for the lithotripsy division was EUR 4.1 million (USD 5.2 million), compared to EUR 4.6 million (USD 6.4 million) during the year ago period. During the second quarter 2010, the Company recorded sales of nine lithotripsy machines, including four Sonolith i-sys devices and two Sonolith i-move devices. 

Gross profit for the second quarter 2010 was EUR 2.5 million (USD 3.1 million), compared to EUR 3.2 million (USD 4.4 million) for the year ago period. Gross profit margin was 41.5% in the second quarter 2010, compared to 46.6% in the year ago period.

Operating expenses were EUR 3.8 million (USD 4.7 million) for the second quarter 2010, compared to EUR 3.7 million (USD 5.1 million) for the same period 2009. Second quarter 2010 operating expenses included EUR 0.7 million related to the U.S. FDA ENLIGHT clinical trial for Ablatherm-HIFU.

Operating loss was EUR 1.3 million (USD 1.6 million) for the second quarter 2010, compared to EUR 0.5 million (USD 0.7 million) for the year ago period. Excluding U.S. FDA trial expenses, second quarter 2010 operating loss was EUR 0.6 million.

Net loss for the second quarter 2010 was EUR 1.0 million (USD 1.3 million), or EUR 0.09 per diluted share, compared to a net loss of EUR 0.5 million (USD 0.7 million), or EUR 0.05 per diluted share, in the year ago period. The second quarter 2010 net loss included a non-cash interest income of EUR 0.6 million (USD 0.8 million) to adjust the Company's convertible debt and outstanding warrants to fair value, compared to a EUR 0.7 million (USD 0.9 million) non-cash income during the prior year period.

At June 30, 2010, cash and cash equivalents, including short-term treasury investments, were EUR 11.4 million (USD 14.0 million). With its current cash position, the Company continues to be well funded to pursue its strategic development projects, both in the U.S. and Europe.