POSS Possis Medical (MM)

Possis Medical, Inc. (NASDAQ: POSS), a developer, manufacturer and marketer of pioneering medical devices used in endovascular procedures, today reported results for its fiscal 2008 second quarter. For the second quarter ended Jan. 31, 2008, Possis� net sales increased 30 percent to $20.6 million from fiscal 2007 second-quarter sales of $15.8 million. The Company reported net income of $570,000, or $0.03 per diluted share, versus net income of $174,000, or $0.01 per diluted share, for the prior-year period. This includes stock-based compensation expense of $536,000, net of tax, or $0.03 per diluted share, and $662,000, net of tax, or $0.04 per diluted share, for the fiscal 2008 and 2007 second quarters, respectively. �Possis continues to have success in placing AngioJet� Ultra Consoles,� said Robert G. Dutcher, CEO of Possis Medical, Inc. �As a result, we�re seeing a corresponding rise in Ultra Console and Thrombectomy Set sales, which helped fuel our favorable second-quarter results. To date, Possis has placed 525 Ultra System Consoles�placing 136 and selling 80 in the second quarter alone�and sales of Ultra Thrombectomy sets were 42 percent of total catheter sales in the second quarter.� AngioJet Ultra Console placements and sales in the fiscal 2007 second quarter totaled 22 and 10, respectively. As previously disclosed, Possis has increased its allowance for sales returns due to the AngioJet Ultra Thrombectomy System launch. The Company�s fiscal second-quarter allowance for sales return was 2.4 percent of gross revenue. This is up from approximately 1.6 percent for the year-ago quarter, and down from 2.6 percent of gross revenue in the sequential fiscal 2008 first quarter. The year-over-year increase is due to the expected rise in returns of disposable product inventory usable only with the previous-generation AngioJet System, as a result of customer conversion to the new Ultra System. Please refer to the table on page 5 for additional details on revenue and sales returns. Possis� peripheral product sales delivered 25 percent year-over-year growth in the second quarter, coronary product revenues increased 17 percent year-over-year and 9 percent sequentially, and AV access product line sales were flat during the same period. Overall, catheter set sales, or disposables, rose 17 percent from the prior-year second quarter and 7 percent sequentially. Sales of new non-AngioJet products, such as the SafeSeal� Hemostasis Patch and the Fetch(R) Aspiration Catheter rose year-over-year. For the second quarter, Possis� gross profit margin was 66.8 percent, down sequentially from 69.4 percent in the fiscal 2008 first quarter, and versus 70.0 percent in the year-ago second quarter. The year-over-year decrease was due primarily to the shift in the overall sales mix from disposables to lower margin consoles, combined with higher non-recurring costs to bring first-generation disposable inventory levels down. Sequentially and year-over-year, average selling prices remained firm across the Company�s product lines. Selling, general and administrative expenses (SG&A) increased by $1.3 million from the year-earlier second quarter, to $10.6 million. Sales force additions and commissions on higher sales levels, combined with additional marketing expenses to support new product launches, contributed to the increase. Fiscal 2008 second-quarter research and development (R&D) spending increased slightly to $2.6 million. R&D spending represented 12.4 percent of second-quarter revenue. On Jan. 31, 2008, cash, cash equivalents and marketable securities totaled $40.6 million, up slightly from $40.4 million on Oct. 31, 2007. For the six-month period ended January 31, 2008, sales totaled $39.5 million, versus $31.4 million in the prior year. The Company reported net income of $674,000 for the six months on a GAAP basis, including stock-based compensation expense of $1.0 million, net of tax, or $0.05 per diluted share. For the prior-year six months, Possis reported a GAAP net loss of $60,000, including stock-based compensation expense of $1.3 million, net of tax, or $0.08 per diluted share. Non-GAAP (pro forma) net income for the first half of fiscal 2008 was $1.6 million, or $0.09 per diluted share, compared to $1.3 million, or $0.07 per diluted share, for fiscal 2007. Product Update The Spiroflex� VG catheter, the last of the current AngioJet Catheter models to be released in an Ultra-compatible version, was launched during the second quarter, providing physicians with Possis� patented Cross-Stream� technology to capture and remove larger thrombus. Clinical Science Update Coronary Thrombectomy At the October 2007 Transcatheter Cardiovascular Therapeutics (TCT) conference, Dr. Cindy Grines of William Beaumont Hospital in suburban Detroit presented very favorable results from an extensive meta-analysis of all literature reports detailing AngioJet use in heart attack patients. Grines� analysis of more than 1,000 cases showed that the AngioJet patients performed just as well as non-AngioJet patients for survival without subsequent heart attacks or the need to re-treat, despite the fact that the AngioJet patients were at significantly higher clinical risk to start with because of their more frequent and larger thrombus. This work will soon be presented in manuscript form for publication. At the upcoming American College of Cardiology (ACC) meeting in Chicago in late March, the Company is sponsoring a panel discussion by several select clinical experts who will detail the latest innovations for patient management during AngioJet coronary thrombectomy. The panel�s findings will be published as a supplement to the Journal of Invasive Cardiology later in 2008. Possis� JETSTENT clinical trial of AngioJet thrombectomy in heart attack patients with large thrombus has enrolled more than 260 patients to date at nine active sites, mostly in Europe. The Company recently began a planned interim analysis of this growing dataset. Peripheral Arterial Thrombus and Venous Thromboembolic (VTE) Disease Possis� prospective, Web-based PEARL registry (PEripheral use of AngioJet Rheolytic Thrombectomy with Mid-Length Catheters) continues active patient enrollment, with more than 150 patients to date, treated with either the AngioJet DVX� or Xpeedior� catheter. Eventually, the PEARL registry will involve 20 or more high-volume peripheral AngioJet thrombectomy centers, will be an ongoing source of case studies, scientific presentations, and publications on the uses and clinical value of AngioJet thrombectomy in a variety of peripheral vascular disease challenges. The Company has assembled an independent physician panel to guide the progress of the PEARL registry. This physician steering committee will have its first meeting this spring and Possis expects several scientific presentations from PEARL to come out later this year Business Outlook Given the execution by Possis of a definitive merger agreement with MEDRAD, as announced February 11, 2008, it is suspending guidance pending the outcome of the acquisition contemplated by that agreement.. Second-Quarter Conference Call The Company will host a conference call today, Wednesday, Feb. 20, 2008, at 9:30 a.m. (CT). Bob Dutcher, Chairman & CEO, and Jules Fisher, CFO, will discuss fiscal 2008 second-quarter operating results. To join the conference call, dial 1-800-762-8779 (international 1-480-248-5081). A replay of the conference call will be available one hour after the call ends through 11:59 P.M. (CT) on Feb. 22, 2008. To access the replay, dial 1-800-406-7325 (international 1-303-590-3030) and use the access code 3804797. For individual investors, a Webcast of the conference call will be available at www.possis.com under the �Investors� tab, or at www.fulldisclosure.com. Institutional investors can access the Webcast through a password-protected site at www.streetevents.com. An archived Webcast of Possis� conference call will be available for 30 days. About Possis Medical, Inc. Possis Medical, Inc., develops, manufactures and markets pioneering medical devices for the large and growing cardiovascular and vascular treatment markets. The Company's AngioJet System is the world's leading mechanical thrombectomy system with FDA approval to remove large and small thrombus from coronary arteries, coronary bypass grafts, peripheral arteries and veins, A-V grafts and native fistulas. Certain statements in this press release constitute "forward-looking statements" within the meaning of Federal Securities Laws. Some of these statements relate to clinical initiatives and the announced pending merger with Medrad. These statements are based on our current expectations and assumptions, and entail various risks and uncertainties that could cause actual results to differ materially from those expressed in such forward-looking statements. A discussion of these and other factors that could impact the Company's future results are set forth in the cautionary statements included in the Company's Form 10-K for the year ended July 31, 2007, filed with the Securities and Exchange Commission. POSSIS MEDICAL, INC. CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) FOR THE THREE AND SIX MONTHS ENDED JANUARY 2008 AND 2007 (UNAUDITED) � � Three Months Ended Six Months Ended Jan. 31,2008 � Jan. 31,2007 Jan. 31,2008 � Jan. 31,2007 Product sales $ 20,632,570 $ 15,806,085 $ 39,501,941 $ 31,409,966 Cost of medical products � 6,843,143 � � 4,737,400 � � 12,610,099 � � 9,145,594 � Gross profit 13,789,427 11,068,685 26,891,842 22,264,372 � Selling, general and administrative 10,614,068 9,265,398 21,778,065 19,081,443 Research and development � 2,562,865 � � 1,943,999 � � 4,885,076 � � 4,358,673 � Other expenses � 13,176,933 � � 11,209,397 � � 26,663,141 � � 23,440,116 � � Operating income (loss) 612,494 (140,712 ) 228,701 (1,175,744 ) Interest income 481,978 536,620 985,361 1,076,112 Loss on sale of securities � (77,768 ) � (38,208 ) � (7,093 ) � (19,317 ) � Income (loss) before income taxes 1,016,704 357,700 1,206,969 (118,949 ) Provision (benefit) for income taxes � 447,143 � � 184,000 � � 533,193 � � (59,000 ) � Net income (loss) 569,561 173,700 673,776 (59,949 ) � Other comprehensive income, net of tax: Unrealized gain (loss) on securities � 156,000 � � (5,000 ) � 219,000 � � 188,000 � Comprehensive income $ 725,561 � $ 168,700 � $ 892,776 � $ 128,051 � � Weighted average number of common shares outstanding: Basic 16,955,183 17,179,940 16,931,284 17,164,966 Diluted 17,923,568 17,734,245 17,837,661 17,164,966 � Net income (loss) per common share: Basic $ 0.03 � $ 0.01 � $ 0.04 � $ 0.00 � Diluted $ 0.03 � $ 0.01 � $ 0.04 � $ 0.00 � POSSIS MEDICAL, INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED) � � ASSETS January 31, 2008 July 31, 2007 � CURRENT ASSETS: Cash and cash equivalents $ 5,078,220 $ 2,664,607 Marketable securities 35,505,164 40,207,324 Trade receivables (less allowance for doubtful accounts and returns of $1,216,000 and $1,131,000, respectively) 9,811,976 8,647,569 Inventories 10,976,181 9,351,888 Prepaid expenses and other assets 2,885,353 2,955,583 Deferred tax asset � 2,010,000 � � 2,010,000 � Total current assets 66,266,894 65,836,971 � PROPERTY AND EQUIPMENT, net 4,510,492 4,872,574 DEFERRED TAX ASSET 9,554,152 9,518,000 NOTE RECEIVABLE � RAFAEL MEDICAL 1,500,000 -- INVESTMENT IN RAFAEL MEDICAL 2,612,887 2,612,887 PREPAYMENT TO VENDOR 1,330,000 -- OTHER ASSET � 1,100,277 � � 1,080,889 � � TOTAL ASSETS $ 86,874,702 � $ 83,921,321 � � LIABILITIES AND SHAREHOLDERS' EQUITY � CURRENT LIABILITIES: Trade accounts payable $ 1,826,686 $ 2,558,413 Accrued salaries, wages, and commissions 4,455,375 4,503,546 Other liabilities � 2,569,507 � � 2,369,801 � Total current liabilities 8,851,568 9,431,760 OTHER LIABILITIES 1,298,563 1,201,743 � COMMITMENTS AND CONTINGENCIES � SHAREHOLDERS' EQUITY: Common stock-authorized, 100,000,000 shares of $0.40 par value each; issued and outstanding, 17,033,157 and 16,894,416 shares, respectively 6,813,263 � 6,757,766 Additional paid-in capital 79,757,028 77,538,548 Accumulated other comprehensive gain (loss) 159,000 (60,000 ) Retained deficit � (10,004,720 ) � (10,948,496 ) � Total shareholders� equity � 76,724,571 � � 73,287,818 � TOTAL LIABILITIES AND SHAREHOLDERS� EQUITY $ 86,874,702 � $ 83,921,321 � AngioJet System Key Business Indicators � � � � � Worldwide Market Data � Q2-07 � Q3-07 � Q4-07 � Q1-08 � Q2-08 AngioJet Revenue - $(000) � $15,439 � $15,619 � $18,154 � $18,092 � $19,797 AngioJet 3000 Drive Units Sold � 19 � 15 � 13 � 16 � 4 AngioJet Ultra Consoles Sold � 10 � 36 � 67 � 61 � 80 AngioJet 3000 Drive Units & Ultra Consoles in the Field � 1,899 � 1,966 � 2,144 � 2,242 � 2,342 AngioJet Catheters Sold � 11,835 � 11,227 � 12,586 � 12,603 � 13,012 Below is the quarterly effect of Stock-Based Compensation Expense under SFAS 123(R) on the operations of the Company. All amounts are in thousands except for EPS diluted. � � Q2-07 � Q3-07 � Q4-07 � Q1-08 � Q2-08 Cost of medical products � $ 93 � � $ 89 � � $ 75 � � $ 68 � � $ 75 � Selling, general and administrative � � 587 � � � 613 � � � 492 � � � 419 � � � 541 � Research and development � � 175 � � � 174 � � � 139 � � � 130 � � � 144 � Income tax provision � � (193 ) � � (207 ) � � (175 ) � � (174 ) � � (224 ) Net income � � (662 ) � � (669 ) � � (531 ) � � ( 443 ) � � (536 ) EPS diluted � � (0.04 ) � � (0.04 ) � � (0.03 ) � � (0.03 ) � � (0.03 ) � � � � � � � � � � Q2-07 � Q3-07 � Q4-07 � Q1-08 � Q2-08 Gross Product Sales $ 16,066 � � $ 16,800 � � $ 19,720 � � $ 19,379 � � $ 21,143 � Less: Sales Returns & Allowances � (260 ) � � (560 ) � � (715 ) � � (510 ) � � (510 ) Net Product Sales � 15,806 � � � 16,240 � � � 19,005 � � � 18,869 � � � 20,633 �