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CSI Reports Q2 Fiscal 2009 Results

Cardiovascular Systems Inc. (CSI) has reported a revenues of $14 million for the second quarter of fiscal 2009, up 200%, compared with the revenues of $4.6 million in the year ago quarter. It reported a net loss of $8.7 million or $1.51 per share, for the second quarter of fiscal 2009, compared with the net loss of $9.8 million, or $1.56 per share, in the year ago quarter.

CSI also reported it expects to close its earlier announced merger transaction on or about February 25, 2009, in which CSI will combine its business with Replidyne, Inc. in an all-stock transaction. The combined company will be named Cardiovascular Systems Inc. and it has applied for listing on the Nasdaq Global Market under the symbol “CSII.”

Net loss applicable to common shareholders, which includes the effect of accretion of redeemable convertible preferred stock, was $(11.7) million compared with $(10.1) million last year, reflecting an increase in preferred stock accretion of $2.6 million.The number of weighted average common shares increased by 1.2 million from the issuance of restricted stock and exercise of stock options.

David L. Martin, CSI president and chief executive officer, noted: “CSI’s fiscal second-quarter revenue was driven by solid increases in both the number of accounts and Diamondback 360º devices sold. Over the last year, our direct sales staff grew to nearly 90 professionals from 20, and we are seeing the results of this investment. To sustain our growth, we have continued to make additional investments in infrastructure and product development.”

The number of hospitals using the Diamondback 360º system rose to 400 by the end of the second quarter, up from 283 at the end of the first quarter of fiscal 2009 and 39 at the end of the second quarter of fiscal 2008. Sales of disposable units also showed strong growth with nearly 4,400 units sold in the second quarter this year, up from 3,600 units in first quarter this fiscal year and 1,400 units in the second quarter of fiscal 2008.

Martin continued, “Revenue has grown significantly each quarter since CSI commercially launched the Diamondback 360º system in September 2007 – a strong endorsement of our product. The Diamondback 360º system is demonstrating its utility in treating a broad range of plaque types, especially calcified plaque, both above and below the knee. The product’s efficacy, safety, ease of use and procedure speed make it a valuable tool for every peripheral lab in the battle against peripheral arterial disease.”

This year’s second-quarter gross margin increased to 70% from 53% in the same period last year, driven by higher disposable volumes and manufacturing efficiencies. Sales, general and administrative expenses rose 55% to $14.9 million, reflecting the increase in the sales organization and infrastructure investments to support growth. CSI continues to emphasize product development and innovation. As a result, research and development rose 16% to $3.5 million.

In the first six months of fiscal 2009, revenue grew to $25.6 million, more than five times greater than the $4.6 million in the same period year ago, which only had one quarter of revenue due to the timing of FDA clearance to market the initial Diamondback 360º product. The gross margin in the first six months of fiscal 2009 was 69%, up from 41% in the same period last year, due to higher product volumes and manufacturing efficiencies. In the first half of fiscal 2009, the net loss was $(22.4) million, compared to $(17.2) million in the first half of fiscal 2008. The higher net loss was due to significant investments in sales and marketing, and infrastructure to support growth, as well as product development. The net loss available to common shareholders, including accretion of preferred stock, was $(25.4) million, or $(3.29) per diluted share, in the first half of fiscal 2009, compared to $(22.4) million, or $(3.50) per diluted share, in the comparable period last year.

Fiscal 2009 Outlook

For the last six months of fiscal year 2009, ending June 30, 2009, CSI expects revenue to range between $31.0 million and $33.0 million, bringing the expected full fiscal year’s revenue to between $56.6 million and $58.6 million. This represents growth of greater than 150% over fiscal year 2008 and a 21% to 29% increase in the second half of fiscal 2009 over the first half of the year. Gross margin is anticipated to be in the range of 70% to 73% for the six-month period. The company also projects a net loss for the last six months of fiscal year 2009 ranging from $(17.0) million to $(19.0) million, compared to $(22.4) million in the first half of the year. The net loss improvement results from increasing revenue and gross profit, with lower operating expense growth. The improvement is more pronounced on an adjusted EBITDA basis, calculated as loss from operations less depreciation and amortization and stock-based compensation expense. The loss range on an adjusted EBITDA basis is expected to be approximately $(10.0) million to $(12.0) million in the last half of fiscal 2009, a substantial improvement from the $(18.8) million negative adjusted EBITDA in the first half of fiscal 2009.