ANSI Advanced Neuromodulation Systems (MM)

Advanced Neuromodulation Systems Reports Record Quarterly Revenue of $38.7 Million and EPS of $0.25 Neuro Revenue Increased 26.1% Versus Second Quarter of 2004 and 21.4% Sequentially DALLAS, July 28 /PRNewswire-FirstCall/ -- Advanced Neuromodulation Systems, Inc. (ANS) (NASDAQ:ANSI) today announced record revenue for the second quarter of 2005, as sales of neuromodulation products increased 26.1% compared to the second quarter of 2004 and 21.4% sequentially. The Company also reported earnings per fully diluted share of $0.25. Second Quarter Results For the three months ended June 30, 2005, revenue increased 26.9% to a record $38,693,000 from $30,488,000 for the second quarter of 2004. Sales of neuro products increased 26.1% to $34,855,000 for this year's second quarter compared to $27,633,000 for last year's second quarter, and increased 21.4% compared to the first quarter of 2005. This growth was driven by strong sales of ANS' Genesis(R) and GenesisXP(TM) implantable spinal cord stimulation (SCS) systems for the treatment of chronic pain, as well as expanded market availability beginning late in the quarter of the Company's new flagship rechargeable implantable pulse generator (IPG) system, the Eon(TM) Neurostimulation System. Gross margin was 72.9% for this year's second quarter compared to 72.5% for the second quarter of 2004. Research and development spending increased 55.6% to $4,465,000 from $2,870,000 to support ANS' new product and new indication development initiatives. Marketing expense was about unchanged as a percentage of revenue for this year's second quarter versus last year, while G&A expense increased to 10.4% of revenue from 8.9% last year, reflecting higher legal and recruiting and relocation expenses. Net income for the second quarter of 2005 increased 17.6% to $5,086,000, or $0.25 per diluted share, from $4,323,000, or $0.21 per diluted share, for the second quarter of 2004. At June 30, 2005, ANS had total cash and marketable securities of approximately $154.5 million. ANS has no debt. To date, the Company has repurchased 923,674 shares of its common stock under a 2,000,000-share repurchase authorization. First Half Results For the six months ended June 30, 2005, revenue increased 24.3% to a record $71,029,000 from $57,121,000 for the first half of 2004. Neuro sales increased 22.6% to $63,572,000 compared to $51,861,000 last year. Net income for the first six months of 2005 was $63,655,000, or $3.06 per diluted share. This compares to net income for the first six months of 2004 of $8,292,000, or $0.39 per diluted share. Net income for this year's first half included a pre-tax gain of $85,244,000 from the previously announced sale of Cyberonics, Inc. common stock acquired in August 2004. Expanded Market Launch Of Eon Neurostimulation System On June 21, 2005, ANS announced an expanded U.S. market launch of its newest rechargeable IPG system, the Eon Neurostimulation System, after successfully completing a market test and increasing inventories. "Sales significantly exceeded our expectations, and we sold out our inventory of Eon systems within four weeks," said President and CEO Chris Chavez. "We will increase production of Eon as quickly as possible, but until our capacity increases over the next few months to meet demand, we will have to carefully manage allocation of this exciting new rechargeable IPG system." "ANS enjoys the broadest, most advanced product offering in the industry to address the needs of interventional pain physicians and their pain patients. With our impressive line of generators and an equally impressive list of leads and programmers, we believe we are uniquely positioned to address the diverse needs of the market at many different price points. We expect our expanded product range, combined with our excellent sales representation in the field and our dedication to providing excellent customer service, to sustain ANS' highly competitive position in interventional neuromodulation." Expanded Clinical Indications For Neuromodulation "The interventional neuromodulation market now exceeds one billion dollars, and promises to become a multi-billion dollar, multi-indication modality in the years ahead. The clinical indications that neuromodulation can address are large, under-served and under-penetrated. Neuromodulation holds the promise to improve the quality of life for millions of people who suffer from chronic pain and other chronic diseases. As more and more people become aware of the benefits of neuromodulation, we are increasingly excited about our mission to develop ever-improving neuromodulation technologies to address an expanding set of clinical indications." Chavez noted that ANS decided in the first quarter to accelerate clinical studies, regulatory approval efforts and product development. "We are leveraging our platform technologies into emerging clinical applications that we believe will fuel strong organic growth for years to come. In addition to the planned pivotal studies to treat migraine headaches, essential tremor and Parkinson's disease and the pilot study to treat chronic treatment-resistant depression, we are systematically incubating such promising new indications as pelvic pain, obesity, tinnitus, angina, ischemic pain associated with peripheral vascular disease, obsessive compulsive disorder, and traumatic brain injury." The CEO continued, "ANS is making good progress on an extensive pipeline of clinical trials and emerging therapies. Multiple sites have been initiated in the Essential Tremor pivotal trial, patients are being recruited, and we anticipate that the initial implants will occur in third quarter. In mid-April, ANS received FDA approval for a 136-patient pivotal trial at 12 sites for Parkinson's disease, and we have been aggressively working through the Institutional Review Boards (IRBs) as well as clinical study agreements at the investigational sites. We currently anticipate that the first implant will also occur in third quarter. ANS also received conditional approval from the FDA for a 20-patient, 3-center, Interstitial Cystitis study which is expected to get underway in the fourth quarter." Regarding the migraine pivotal trial, Chavez said, "The goal of a pivotal trial is to prove safety and efficacy for the indicated population. Our physician advisors recommended a modification to our approved FDA pivotal trial protocol for migraine that will broaden the indicated population and perhaps ultimately speed up patient enrollment. We are preparing to submit these changes to the FDA, and now expect implants for this indication to begin in the fourth quarter of 2005. "The prospect of using neurostimulation to treat various psychiatric diseases is gaining momentum and generating excitement in the neurosurgical community. We recently received an approval in Canada to begin our pilot study for treatment-resistant depression and will soon begin recruiting patients. Additionally, we recently acquired exclusive intellectual property to stimulate a specific target in the brain to treat Obsessive Compulsive Disorder." Management Reaffirms Revenue Guidance for 2005 and Increases EPS Guidance Chavez said that management continues to expect revenue for 2005 of approximately $145 million. We continue to expect to significantly increase our investment in clinical studies, regulatory and R&D in 2005 compared to 2004. Including the impact of these increases, and taking into account the decreased number of issued and outstanding shares as a result of our stock repurchases, we are increasing our forecast for net income for 2005 to a range of $3.54 to $3.57 per diluted share," Chavez said. Previously, management had expected net income in the range of $3.49 to $3.52 per diluted share. Conference Call ANS has scheduled a conference call today at 11:00 a.m. EDT. The simultaneous webcast is available at http://www.ans-medical.com/investors . A replay will be available at this same Internet address, or at (800) 633-8284, reservation #21252499, after 1:00 p.m. EDT. About Advanced Neuromodulation Systems Advanced Neuromodulation Systems designs, develops, manufactures and markets implantable systems used to manage chronic intractable pain and other disorders of the central nervous system. Fortune magazine recently ranked ANS as the 36th fastest growing small company in its annual list of the Top 200 Fastest Growing Small Companies in the United States. Forbes magazine recently recognized ANS as one of America's 200 Best Small Companies. Frost & Sullivan, an international strategic market research firm, also recently presented ANS with its Product Innovation Award, recognizing ANS as the technology innovation leader in the neurostimulation market and ANS' Genesis(R) Implantable Pulse Generator system as the most advanced fully implantable spinal cord stimulator on the market. Additional information is available at http://www.ans-medical.com/ . "Safe harbor" statement under the Private Securities Litigation Reform Act of 1995: Statements contained in this document that are not based on historical facts are "forward-looking statements." Terms such as "plan," "should," "would," "anticipate," "believe," "intend," "estimate," "expect," "predict," "scheduled," "new market," "potential market applications" and similar expressions are intended to identify forward-looking statements. Such statements are by nature subject to uncertainties and risks, including but not limited to market acceptance of our new rechargeable IPGs, as well as continued market acceptance of our conventional IPGs and radio-frequency powered SCS systems; competition from and the launch of new competitive products by Medtronic, Advanced Bionics/Boston Scientific or others, as well as other market factors that could impede growth in or reduce sales of the Company's IPG and RF systems, which could adversely affect revenues and profitability; patient or physician selection of less invasive or less expensive alternatives; adverse changes in coverage or reimbursement amounts by Medicare, Medicaid, private insurers, managed care organizations or workers' comp programs; intellectual property protection and potential infringement issues; the cost, uncertainty and other risks inherent in litigation generally, including without limitation the intellectual property and patent litigation against Advanced Bionics and the securities class action litigation filed in the first quarter of 2005; obtaining necessary government approvals for other new products or applications and maintaining compliance with FDA product and manufacturing requirements; product liability; reliance on single suppliers for certain components; completion of research and development projects in an efficient and timely manner; successful patient enrollment in and timely implementation of the IDE clinical studies for migraine headache, Essential Tremor and Parkinson's disease; physician and patient acceptance of the Libra DBS system for the Essential Tremor and Parkinson's disease studies, for which already-approved products are already available on the market; the uncertainty of clinical results that may ensue from these and other clinical studies; the risk that the FDA may not approve our PMA applications for these applications following the completion of the clinical trials; the satisfactory completion of feasibility, pilot and pivotal studies and/or market tests prior to the introduction of new products generally; successful integration of acquired businesses, products and technologies; international trade risks; and other risks detailed from time to time in the Company's SEC filings. Consequently, if such management assumptions prove to be incorrect or such risks or uncertainties materialize, anticipated results could differ materially from those forecast in forward-looking statements Such forward-looking statements speak only as of the date on which they are made, and the Company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this release. (tables attached) ADVANCED NEUROMODULATION SYSTEMS, INC. and SUBSIDIARIES Condensed Consolidated Statements of Income (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 2005 2004 2005 2004 Net revenue $38,693,227 $30,487,851 $71,028,690 $57,120,714 Cost of revenue 10,475,418 8,371,311 18,922,252 15,336,843 Gross profit 28,217,809 22,116,540 52,106,438 41,783,871 Operating expenses: Sales and marketing 12,051,776 9,454,727 22,142,095 18,018,773 Research and development 4,464,991 2,869,660 7,789,698 5,184,610 General and administrative 4,007,926 2,706,956 7,351,380 5,023,696 Amortization of other intangibles 657,547 623,773 1,297,527 1,198,647 21,182,240 15,655,116 38,580,700 29,425,726 Income from operations 7,035,569 6,461,424 13,525,738 12,358,145 Other income (expense): Gain on sale of investment in common stock of Cyberonics, Inc. --- --- 85,244,301 --- Foreign currency transaction loss (117,190) (25,506) (164,815) (54,853) Investment income 1,091,257 229,842 1,638,118 481,171 974,067 204,336 86,717,604 426,318 Income before income taxes 8,009,636 6,665,760 100,243,342 12,784,463 Income taxes 2,923,517 2,342,348 36,588,820 4,492,460 Net income $5,086,119 $4,323,412 $63,654,522 $8,292,003 Basic income per share: Net income $0.26 $0.22 $3.18 $0.41 Number of basic shares 19,678,020 20,107,481 20,022,505 20,018,213 Diluted income per share: Net income $0.25 $0.21 $3.06 $0.39 Number of diluted shares 20,442,848 21,047,875 20,817,647 21,158,756 ADVANCED NEUROMODULATION SYSTEMS, INC. and SUBSIDIARIES Condensed Consolidated Balance Sheets (Unaudited) June 30, December 31, 2005 2004 Assets Current assets: Cash and marketable securities $154,479,782 $124,016,064 Receivable, trade net 29,860,358 25,322,813 Receivable, investment income and other 1,699,372 638,987 Inventories 23,811,609 23,923,851 Deferred income taxes 1,997,418 2,029,091 Prepaid expenses and other current assets 1,725,235 1,888,957 Total current assets 213,573,774 177,819,763 Net property, equipment and fixtures 34,213,645 33,175,329 Minority equity investments in preferred stock 1,104,000 1,104,000 Goodwill, patents, tradenames purchased technology & other assets, net 35,003,340 35,388,049 Total assets $283,894,759 $247,487,141 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $2,913,064 $3,206,516 Accrued salary and employee benefit costs 3,549,714 2,390,721 Accrued commissions 2,641,180 2,656,112 Income taxes payable 16,626,851 708,412 Deferred revenue 107,028 165,861 Other accrued expenses 750,497 342,075 Total current liabilities 26,588,334 9,469,697 Deferred income taxes 6,126,604 14,734,487 Non-current deferred revenue 643,605 718,820 Total stockholders' equity 250,536,216 222,564,137 Total liabilities and stockholders' equity $283,894,759 $247,487,141 DATASOURCE: Advanced Neuromodulation Systems, Inc. CONTACT: investors, Neil Berkman Associates, +1-310-277-5162, or , for Advanced Neuromodulation Systems, Inc.; or Chris Chavez, President & CEO of Advanced Neuromodulation Systems, Inc., +1-972-309-8000 Web site: http://www.ans-medical.com/ http://www.ans-medical.com/investors

Copyright