Cambridge Heart, Inc. (OTCBB: CAMH), today reported results for the three and nine months ended September 30, 2010. Full financial statements and corresponding commentary can be found in the Company's Form 10-Q, which is expected to be filed with the Securities and Exchange Commission on November 15, 2010. The following financial and strategic milestones highlight the third quarter:
“We believe that the outstanding brand recognition of Cardiac Science's product lines, when combined with a larger global presence and greater financial strength is a positive development for our partnership.”
- Revenue - Sales for the third quarter were $793,000, an increase of 21% compared to $654,000 in the second quarter of 2010. The Company believes the recent reimbursement change in July 2010 contributed to the increase in revenue.
- Distribution Update - The MTWA Module was launched on September 21, 2010 through the Company's distribution partner, Cardiac Science Corporation, Inc., which was in line with the launch plans. From the launch date through September 30th, the Company shipped an initial order of 10 MTWA modules to Cardiac Science.
- Clinical Update - The Company began enrolling patients in a second clinical site for its' MTWA-CAD study, (the study is designed to determine if the Company's MTWA testing can enhance current diagnostic methods for detecting ischemia in patients with underlying coronary artery disease). The MTWA-CAD trial is a pilot study expected to enroll up to 200 patients. The Company estimates that the enrollments will be completed by mid-2011.
Commenting on the results of the quarter and recent events, Cambridge Heart CEO Ali Haghighi-Mood said, "In the third quarter, the commercial launch of the MTWA Module marked the key milestone of the new strategy we announced last year. We are very pleased with the initial level of activity in promoting and marketing the MTWA Module, and the cooperation between our respective sales and marketing teams. While it is too early to comment on the ultimate rate of adoption, we are encouraged by the activity level seen to date and the growth of the sales pipeline". In regards to the recently announced tender offer by Opto Circuits (India) Ltd. to acquire Cardiac Science Corporation, Haghighi-Mood added, "We believe that the outstanding brand recognition of Cardiac Science's product lines, when combined with a larger global presence and greater financial strength is a positive development for our partnership."
Financial Results for the Three and Nine Months ended September 30, 2010
Total revenue for the third quarter ended September 30, 2010 was $793,000, compared to total revenue of $798,000 reported during the same period of 2009. Sales continue to be adversely impacted by ongoing weakness in the sales of medical equipment in general, our limited scope of distribution, and the uncertainty around certain reductions in reimbursement. Cost of sales for the third quarter of 2010 was $535,000, compared to $456,000 in the same period in 2009. Gross profit, as a percent of revenue, for the three months ended September 30, 2009 and 2010, was 43% and 33%, respectively. The decrease in gross profit compared to 2009 is due to start-up manufacturing costs in connection with the MTWA Module and more than average number of treadmills included in orders of the HearTwave II System. The reserve against inventory the Company established, which was based on the uncertainty that the Company will realize the full value of the existing inventory over the next 12 months, was unchanged. The inventory was built up in order to satisfy our contractual obligations under the former co-marketing agreement with St. Jude Medical.
Operating expenses for the third quarter of 2010 were $1,378,000, a decrease of $645,000, or 32%, compared to $2,023,000 in the third quarter of 2009. The decrease in operating expense is driven by lower selling, general and administrative expenses related to consultative and advisory activities, lower non-cash compensation due to the full vesting of certain previously issued stock option and restricted stock awards, and some reduction in headcount in 2010. The operating loss for the third quarter of 2010 was $1,121,000, compared to an operating loss of $1,681,000 for the same period last year. Included in the operating loss for the third quarter of 2010 was $195,000 of non-cash stock-based compensation expense. The net loss for the quarter was $1,123,000 or $0.02 per share, compared to a net loss of $1,681,000, or $0.03 per share, in the comparable 2009 period.
For the nine months ended September 30, 2010, total revenue was $2,105,000, a decrease of $322,000, or 13%, compared to total revenue of $2,427,000 for the same period in 2009. Operating expenses for the nine-month period in 2010 were $4,567,000 compared to $6,641,000 in 2009. The operating loss for the nine month period ended September 30, 2010 of $3,938,000, which included a $124,000 inventory reserve charge, decreased $1,687,000 compared to an operating loss of $5,625,000, for the same period in the prior year. The operating loss for the nine-month period ended September 30, 2010 included $792,000 in non-cash stock based compensation expense compared to $1,507,000 for the nine-month period ended September 30, 2009. The net loss for the nine-month period ended September 30, 2010 was $3,946,000, or $0.06 per share, compared to a net loss of $5,616,000, or $0.09 per share, during 2009. Cost of sales for the nine months ended September 30, 2010 was $1,476,000 (which includes a $124,000 charge to reserve for potentially excess inventory) compared to $1,411,000 in the same period in 2009. Gross margin as a percent of revenue for the nine months ended September 30, 2010 was 30% compared to 42% in 2009. This decrease in gross margin is primarily attributable to the $124,000 inventory reserve provision, recorded in the first six months ended June 30, 2010, in connection with inventory built up to satisfy our contractual obligations under the arrangement with St. Jude Medical, coupled with start-up manufacturing costs in connection with the MTWA Module and above average number of treadmills at no charge were included in orders of the HearTwave II System in the third quarter.
The Company ended the third quarter with unrestricted cash and cash equivalents of $1,516,000. The cash used by operations was $3,072,000 for the nine months ended September 30, 2010. The Company believes that the existing resources and currently projected financial results, which include sales of the MTWA Module and Micro-V Alternans Sensors to Cardiac Science, are sufficient to fund operations through December 31, 2010. The projections do not include the potential additional proceeds of up to $752,000, $0.107 per share, from the exercise of the previously unexercised Short-Term Warrants that were issued in connection with the Series D Private Placement, which expire on December 23, 2010. In the event the remaining outstanding Short-Term Warrants are exercised, the Company believes it would have sufficient resources to fund its operations through March 31, 2011.
The Company currently has a total of 102.7 million shares of common stock and common stock equivalents issued and outstanding, including the effect of converting the Series C-1 preferred stock and the Series D preferred stock into shares of common stock. In addition, there are options and warrants outstanding to purchase 16.9 million shares of common stock, bringing the fully diluted share count to 119.7 million shares of common stock.
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