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Micrus Reports Q3 Fiscal 2009 Results

Micrus Endovascular Corporation (Micrus) has reported revenues of $18.32 million for the third quarter of fiscal 2009, compared with the revenues of $18.34 million in the year-ago quarter. It has posted a net loss of $2.3 million, or $0.15 per share, for the third quarter of fiscal 2009, compared with the net loss of $5.7 million, or $0.37 per share, in the year-ago quarter.

Following are key revenue results from the third quarter of fiscal 2009, against the third quarter of fiscal 2008:

The third quarter of fiscal 2008 included initial shipments of stretch-resistant microcoils to the company’s distributor in Japan following their regulatory approval.

Worldwide revenues increased 10%, excluding sales to Japan in both periods.

Revenues from the Americas increased 19% to $10.8 million; this includes a 25% increase in revenues from the U.S.

Revenues from Europe decreased 7% to $5.7 million; in constant currencies, revenues from Europe increased 2%.

Revenues from Asia Pacific decreased to $1.9 million from $3.2 million, reflecting higher sales to the Company’s distributor in Japan in the comparable prior year period as mentioned above.

Fiscal third quarter and recent highlights

Worldwide launch of our DeltaPaq microcoils, which represented 8% of third quarter revenues.

Beta launch of the first Ascent balloon catheter, with the full Ascent balloon catheter family expected to be introduced in the first half of the calendar year. The introduction of the Ascent balloon catheter marks another incremental revenue opportunity for Micrus in the non-embolic segment.

Sales of non-embolic products during the third quarter of fiscal 2009 were over 7% of total revenues.

Completed enrollment in the 500-patient prospective, randomized Cerecyte Coil Trial comparing Micrus’ bioactive coils with bare platinum coils. This landmark trial is being led by University of Oxford interventional neuroradiologist Dr. Andrew J. Molyneux, and study results are expected to be submitted to a peer-reviewed journal in 2010.

Completed enrollment in the company’s Cerecyte Microcoil Registry, a non-randomized, U.S. multi-center registry designed to document the clinical and angiographic outcomes of intracranial aneurysms treated with Micrus’ bioactive Cerecyte microcoils, with patient outcomes assessed one year after treatment.

Set a quarterly record in Japan for the number of Micrus microcoils used in procedures.

“Fiscal third quarter revenues were negatively impacted by foreign currency exchange rates, most notably the weakening of the British Pound against the U.S. Dollar. Non-embolic products sales for the quarter grew to a record 7% of total revenues for the Company, driven primarily by the introduction of our Neuropath(R) guide catheter. The sales contribution of our non-embolic products is expected to accelerate due to the launch of the first product in our balloon catheter family and a new guidewire next quarter,” said John Kilcoyne, chairman and chief executive officer of Micrus. “Also, we benefited from reduced operating expenses during the quarter as a result of improved expense monitoring and controls, which helped to narrow our net loss.

“New products continue to represent an important component of our growth strategy, with 26% of third quarter sales coming from products introduced in the past 24 months,” he added. “Among these, our Cashmere(TM) line of softer microcoils represented 15% of the quarter’s total revenues. We are also pleased with the strong reception for our newly launched DeltaPaq microcoil system, which comprised 8% of third quarter revenues. The DeltaPaq features an innovative technology that is designed to achieve greater packing density against conventional microcoils. With the launch of the Ascent balloon catheter, new guidewire and the Neuropath guide catheter, we continue to execute on our strategy of expanding our non-embolic product offering, potentially enabling us to capture a significantly greater portion of hemorrhagic procedure revenues.”

Fiscal third quarter financial results

Gross margin for the third quarter of fiscal 2009 was 74%, against 72% in the third quarter of fiscal 2008. The increase was primarily due to a higher proportion of sales to direct customers against sales to distributors.

Research and development expenses for the third quarter of fiscal 2009 were $2.4 million, against $5.6 million for the comparable prior year period. The decrease was mainly due to a $3.0 million charge for in-process research and development in connection with the acquisition of ReVasc Technologies, Inc. in the third quarter of fiscal 2008.

Sales and marketing expenses for the third quarter of fiscal 2009 were $6.9 million, against $7.4 million for the third quarter of fiscal 2008. The decrease was mainly due to lower personnel costs and a decrease in consulting fees, partially offset by higher costs associated with new product launches.

General and administrative expenses for the third quarter of fiscal 2009 were $5.9 million, against $6.2 million for the comparable prior year period. The decrease is primarily due to lower legal fees resulting from the settlement of the patent litigation with Boston Scientific and the conclusion of the U.S. Department of Justice monitorship, partially offset by an increase in personnel costs.

Other expense, net, of $1.0 million for the third quarter of fiscal 2009 was primarily due to foreign exchange losses arising from the remeasurement of foreign currency transactions. This represents a decrease of $1.1 million against $67,000 of other income, net, for the third quarter of fiscal 2008.

Year-to-date financial results

For the nine months ended December 31, 2008, revenues increased 16% to $57.4 million from $49.5 million in the comparable prior year period, reflecting higher sales of both embolic and non-embolic products. Gross margin decreased from 76% to 74% for the first nine months of fiscal 2009 due to higher sales to distributors at lower margins, primarily in Japan and Latin America. Operating expenses for the first nine months of fiscal 2009 were $53.1 million, against $49.3 million in the prior year period. The increase is primarily due to the settlement costs of approximately $1.7 million in connection with the patent litigation with Boston Scientific, higher personnel costs of approximately $4.4 million primarily related to additional headcount and increased stock-based compensation expense, partially offset by a decrease of $3.0 million due to a charge for in-process research and development in connection with the acquisition of ReVasc Technologies, Inc. in the third quarter of fiscal 2008. Other expense, net, of $1.7 million for the nine months ended December 31, 2008 was primarily due to foreign exchange losses arising from the remeasurement of foreign currency transactions. This represents a decrease of $2.1 million against $0.4 million of other income, net, for the first nine months of fiscal 2008.

The net loss for the nine months ended December 31, 2008 was $11.6 million, or $0.74 per share on 15.7 million weighted-average shares outstanding. The net loss included $4.3 million, or $0.27 per share, of non-cash stock-based compensation expense. This compares with a net loss of $10.1 million, or $0.66 per share on 15.4 million weighted-average shares outstanding, in the comparable prior year period. The net loss for the nine months ended December 31, 2007 included $3.5 million, or $0.23 per share, of non-cash stock-based compensation expense.

As of December 31, 2008, Micrus had cash and cash equivalents of $14.1 million, against $25.5 million as of March 31, 2008.

Fiscal year 2009 revenue outlook

The company is revising its expectation for fiscal year 2009 revenues to be between $76 million and $79 million from earlier guidance of $78 million to $85 million, due primarily to the impact of foreign currency exchange rates and the uncertainty caused by current economic conditions.