FRAMINGHAM, Mass., May 4, 2016 /PRNewswire/ -- HeartWare
International, Inc. (NASDAQ: HTWR), a leading innovator of
less-invasive, miniaturized circulatory support technologies that
are revolutionizing the treatment of advanced heart failure, today
announced revenue derived from HeartWare® Ventricular
Assist System (HVAD® System) sales of $55.1 million for the first quarter ended
March 31, 2016, compared to
$70.0 million in revenue for the same
period in 2015.
"In the first quarter, our international revenue performance was
impacted by competitive dynamics in Germany, as well as lower implant volumes in
certain other international markets," said Doug Godshall, President and Chief Executive
Officer. "In the U.S., the bridge-to-transplant segment of the
market for which the HVAD System is approved, showed softness
resulting from a slowdown in the volume of patients eligible for
bridge-to-transplant procedures at the start of the year and an
evolving trend toward destination therapy (DT) due to ease of
reimbursement. Our first quarter financial performance and
the overall market dynamics reinforce the importance of our work
toward securing a DT indication in the U.S. and focusing our
energies upon the continued enhancement of our technologies.
Despite first quarter trends, the HVAD System remains the most
versatile pump, utilized in the widest range of patients, among
currently available ventricular assist systems. The
versatility and utility of the HVAD was on full display at the
recently concluded International Society for Heart and Lung
Transplantation 36th Annual Meeting, where the HVAD System was the
subject of more than 90 oral and poster presentations, reinforcing
the positive, real-world commercial experience with the
device."
First Quarter Financial Results
During the first
quarter of 2016, 578 HVAD Systems were sold globally, which
represented a 19% decrease from 713 units sold in the first quarter
of 2015. During the quarter, U.S. revenue, generated through
the sale of 295 units, was $33.3
million, which was a 21% decrease from $42.2 million in the first quarter of 2015.
More than half of the comparative decrease in units sold in the
U.S. was due to the completion of enrollment in the ENDURANCE2 DT
trial in the third quarter of 2015. For the first quarter of
2016, revenue from international markets, generated through the
sale of 283 units, was $21.7 million,
which represented a decrease of 20% on a constant-currency basis
from $27.8 million in the first
quarter of 2015. Currency fluctuations negatively impacted
total revenue growth by approximately $0.6
million, or approximately 1%, in the first quarter of 2016,
compared to the same period in 2015.
Gross margin percentage decreased to 58.2% in the first quarter
of 2016, compared to 68.5% in the first quarter of 2015, reflecting
lower sales volumes and a $3.5
million charge in the first quarter of 2016 related to
ongoing field actions targeting improved battery and controller
performance of the HVAD System.
Total operating expenses for the first quarter of 2016 were
$47.3 million, compared to
$55.3 million for the first quarter
of 2015.
Research and development expenses were $25.2 million for the first quarter of 2016,
compared to $31.3 million for the
first quarter of 2015. Excluding acquisition-related
amortization and restructuring cost changes, research and
development expenses decreased $3.9
million for the first quarter of 2016, compared to the same
period in 2015, primarily as a result of lower project expenses and
a decrease in share-based compensation.
Selling, general and administrative expenses were $21.5 million for the first quarter of 2016,
compared to $21.9 million for the
first quarter of 2015. Excluding acquisition-related
amortization and restructuring cost changes, selling, general and
administrative expenses increased $0.1
million for the first quarter of 2016, compared to the same
period in 2015. The net increase was primarily due to
professional fees, personnel costs and all other expenses,
partially offset by savings of $0.9
million resulting from the moratorium on the Medical Device
Excise Tax that went into effect on January
1, 2016.
Changes in the fair value of contingent consideration associated
with the 2013 acquisition of CircuLite, Inc. resulted in
$0.6 million of expense during the
first quarter of 2016, compared to $2.1
million of expense in the first quarter of 2015.
Net loss for the first quarter of 2016 was $17.5 million, or a loss of $1.00 per basic and diluted share, compared to a
net loss of $14.5 million, or a loss
of $0.85 per basic and diluted share,
for the first quarter of 2015.
Non-GAAP net loss for the first quarter of 2016 was $16.5 million, or $0.95 per basic and diluted share, compared to a
non-GAAP net loss of $9.4 million, or
$0.55 per basic and diluted share,
for the first quarter of 2015. See "Use of Non-GAAP Financial
Measures" and "Reconciliation of GAAP to Non-GAAP Net Loss Per
Common Share."
At March 31, 2016, HeartWare had
approximately $189 million of cash,
cash equivalents and investments, compared to approximately
$244 million at December 31, 2015. Total cash used during
the first quarter included $31
million in loans made to Valtech Cardio, Ltd. in accordance
with the terminated business combination agreement, annual
incentive payments and costs associated with the battery and
controller field actions.
Conference Call and Webcast Information
HeartWare will
host a conference call on Wednesday, May 4,
2016 at 8:00 a.m. ET to
discuss its financial results for the first quarter and the
company's business outlook. The call may be accessed by
dialing 1-877-407-0789 five minutes prior to the scheduled start
time and referencing "HeartWare." Callers outside the U.S.
should dial +1-201-689-8562.
A live webcast of the call will also be available from the
Investors section of the company's website
(http://ir.heartware.com/). A replay of the conference call
will be available through the above link immediately following
completion of the call.
About HeartWare International
HeartWare International
develops and manufactures miniaturized implantable heart pumps, or
ventricular assist devices, to treat patients around the world
suffering from advanced heart failure. Dedicated to
developing new, minimally invasive technologies to revolutionize
the treatment of patients with end-stage heart failure, HeartWare
has multiple technologies in development to offer progressively
less-invasive mechanical circulatory support options.
HeartWare's corporate headquarters are located in Framingham, Massachusetts, and the company has
technology, operations, manufacturing and distribution centers in
Miami Lakes, Florida; Arden Hills, Minnesota; and Hannover, Germany. For additional
information about the company, please visit www.heartware.com.
Use of Non-GAAP Financial Measures
HeartWare
management supplements its GAAP financial reporting with certain
non-GAAP financial measures for financial and operational decision
making. For example, we use "non-GAAP net loss" and "non-GAAP
net loss per common share" to refer to GAAP loss per share
excluding certain adjustments such as amortization of intangible
assets, impairment charges, purchase accounting and
acquisition-related transaction costs, loss on extinguishment of
long-term debt, and restructuring and severance costs. These are
non-GAAP financial measures under Section 101 of Regulation G under
the Securities Exchange Act of 1934, as amended. Management
believes that providing this additional information enhances
investors' understanding of the financial performance of the
company's operations and increases comparability of its current
financial statements to prior periods. Non-GAAP measures should not
be considered a substitute for measures of financial performance in
accordance with GAAP, and they should be reviewed in comparison
with their most directly comparable GAAP financial results.
Reconciliations of HeartWare's GAAP to non-GAAP financial measures
are provided at the end of this news release under "Reconciliation
of GAAP to Non-GAAP Net Loss Per Common Share."
Forward-Looking Statements
This announcement contains
forward-looking statements that are based on management's beliefs,
assumptions and expectations and on information currently available
to management. All statements that address operating performance,
events or developments that we expect or anticipate will occur in
the future are forward-looking statements, including without
limitation our expectations with respect to: HeartWare's
ventricular assist device business; commercialization of the
HeartWare HVAD System; submission for U.S. approval of a
destination therapy indication; our ability to enhance our
technologies; the timing, progress and outcomes of clinical trials;
and achieving the benefits of our acquired and pipeline technology.
Management believes that these forward-looking statements are
reasonable as and when made. However, you should not place undue
reliance on forward-looking statements because they speak only as
of the date when made. HeartWare does not assume any obligation to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise, except
as may be required by federal securities laws and the rules and
regulations of the Securities and Exchange Commission (SEC).
HeartWare may not actually achieve the plans, projections or
expectations disclosed in forward-looking statements, and actual
results, developments or events could differ materially from those
disclosed in the forward-looking statements. Forward-looking
statements are subject to a number of risks and uncertainties,
including without limitation those described in Part I, Item 1A.
"Risk Factors" in HeartWare's Annual Report on Form 10-K filed with
the SEC. HeartWare may update risk factors from time to time in
Part II, Item 1A. "Risk Factors" in Quarterly Reports on Form 10-Q,
Current Reports on Form 8-K, or other filings with the SEC.
HEARTWARE, HVAD, MVAD, PAL, SYNERGY, CIRCULITE and HeartWare
logos are trademarks of HeartWare, Inc. or its affiliates.
For additional information:
Christopher Taylor
HeartWare International, Inc.
Email: ctaylor@heartware.com
Phone: +1 508 739 0864
- Tables to Follow-
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(in thousands, except
per share data)
|
(unaudited)
|
|
Three Months
Ended
March
31,
|
|
2016
|
|
2015
|
|
|
|
|
Revenue,
net
|
$ 55,074
|
|
$ 70,021
|
Cost of
revenue
|
23,021
|
|
22,040
|
Gross
profit
|
32,053
|
|
47,981
|
|
|
|
|
Operating
expenses:
|
|
|
|
Selling, general and
administrative
|
21,474
|
|
21,929
|
Research and
development
|
25,221
|
|
31,267
|
Change in fair value
of contingent consideration
|
580
|
|
2,100
|
Total operating
expenses
|
47,275
|
|
55,296
|
|
|
|
|
Loss from
operations
|
(15,222)
|
|
(7,315)
|
|
|
|
|
Other expense,
net
|
(2,090)
|
|
(6,988)
|
Loss before
taxes
|
(17,312)
|
|
(14,303)
|
Income tax (benefit)
expense
|
147
|
|
232
|
Net loss
|
$ (17,459)
|
|
$ (14,535)
|
|
|
|
|
Net loss per common
share — basic and diluted
|
$ (1.00)
|
|
$ (0.85)
|
|
|
|
|
Weighted average
shares outstanding — basic and diluted
|
17,462
|
|
17,193
|
HEARTWARE
INTERNATIONAL, INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(in
thousands)
(unaudited)
|
|
|
|
|
|
March 31,
2016
|
|
December 31,
2015
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
113,256
|
|
$
175,047
|
Short-term
investments
|
|
74,952
|
|
68,531
|
Accounts receivable,
net
|
|
29,472
|
|
35,570
|
Inventories
|
(a)
|
43,407
|
|
39,947
|
Prepaid expenses and
other current assets
|
|
6,905
|
|
2,868
|
Total current
assets
|
|
267,992
|
|
321,963
|
Property, plant and
equipment, net
|
|
14,602
|
|
15,098
|
Other assets,
net
|
(a)(b)
|
148,720
|
|
116,542
|
Total
assets
|
|
$
431,314
|
|
$
453,603
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
|
$
13,709
|
|
$
15,249
|
Other accrued
liabilities
|
|
35,521
|
|
45,889
|
Total current
liabilities
|
|
49,230
|
|
61,138
|
Convertible senior
notes, net
|
(b)
|
189,572
|
|
187,089
|
Other long-term
liabilities
|
|
16,945
|
|
16,884
|
Stockholders'
equity
|
|
175,567
|
|
188,492
|
Total liabilities and
stockholders' equity
|
|
$
431,314
|
|
$
453,603
|
|
|
|
|
|
|
(a)
|
Includes
reclassification of non-current inventory to other assets, net of
approximately $7.4 million and $7.7 million as of March 31, 2016
and December 31, 2015, respectively.
|
(b)
|
In the first quarter
of 2016, the Company implemented ASU 2015-03: Simplifying the
Presentation of Debt Issuance Costs. The presentation includes
the reclassification of deferred financing costs as a direct
deduction to convertible senior notes of $3.8 million and $4.0
million as of March 31, 2016 and December 31, 2015,
respectively.
|
Reconciliation to
Constant-Currency Revenue Growth (unaudited) (see
explanation below)
|
(in
thousands)
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
Reported $
chg
|
Reported %
chg
|
FX
impact
|
Constant Currency
$ chg
|
Constant Currency
% chg
|
|
|
2016
|
2015
|
|
|
|
|
|
Total U.S.
Revenue
|
33,348
|
42,189
|
(8,841)
|
-21.0%
|
-
|
(8,841)
|
-21.0%
|
Total Int'l
Revenue
|
21,726
|
27,833
|
(6,106)
|
-21.9%
|
566
|
(5,540)
|
-19.9%
|
Total
Revenue
|
55,074
|
70,021
|
(14,947)
|
-21.3%
|
566
|
(14,381)
|
-20.5%
|
|
|
|
|
|
|
|
|
Constant-currency
changes in the tables above take into consideration the foreign
exchange rates in effect during the three-month period ended March
31, 2015.
|
Reconciliation of
GAAP to Non-GAAP Net Loss Per Common Share (unaudited) (see
explanation of adjustments below) (in thousands, except per
share data)
|
|
|
|
|
|
|
Three Months
Ended March
31,
|
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
GAAP net
loss
|
|
$ (17,459)
|
|
$ (14,535)
|
|
GAAP net loss per
common share – basic and diluted
|
|
$ (1.00)
|
|
$ (0.85)
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
Acquisition-related contingent consideration adjustments
|
(a)
|
580
|
|
2,100
|
|
Amortization
of purchased intangible assets
|
(b)
|
327
|
|
411
|
|
Restructuring
costs
|
(c)
|
20
|
|
2,631
|
|
Total
adjustments
|
|
927
|
|
5,142
|
|
|
|
|
|
|
|
Non-GAAP net
loss
|
|
$ (16,532)
|
|
$ (9,393)
|
|
Non-GAAP net loss per
common share - basic and diluted
|
|
$ (0.95)
|
|
$ (0.55)
|
|
|
|
|
|
|
|
Shares used in
computing non-GAAP net loss per common share - basic and
diluted
|
|
17,462
|
|
17,193
|
|
|
|
|
|
|
|
|
Reconciliation of
GAAP to Non-GAAP Selling, General & Administrative (SG&A)
and Research and Development (R&D) Expenses (unaudited)
(see explanation of adjustments below)
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
(In
thousands)
|
|
2016
|
|
2015
|
|
change
|
|
|
|
|
|
|
|
SG&A operating
expenses on a GAAP basis
|
|
$21,474
|
|
$21,929
|
|
$ (455)
|
-Amortization of purchased intangibles
|
(b)
|
-
|
|
(84)
|
|
84
|
-Restructuring costs
|
(c)
|
(20)
|
|
(467)
|
|
447
|
SG&A operating
expenses on a non-GAAP basis
|
|
21,454
|
|
21,378
|
|
76
|
|
|
|
|
|
|
|
R&D operating
expenses on a GAAP basis
|
|
25,221
|
|
31,268
|
|
(6,046)
|
-Amortization of purchased intangibles
|
(b)
|
(327)
|
|
(327)
|
|
-
|
-Restructuring costs
|
(c)
|
-
|
|
(2,164)
|
|
2,164
|
R&D operating
expenses on a non-GAAP basis
|
|
24,894
|
|
28,777
|
|
(3,882)
|
|
|
|
|
|
|
|
Total SG&A and
R&D on a non-GAAP Basis
|
|
$46,348
|
|
$50,155
|
|
$(3,807)
|
|
|
|
|
|
|
|
(a)
|
Represents the change
in fair value of contingent consideration associated with the
acquisition of CircuLite in December 2013.
|
(b)
|
Represents
amortization of purchased intangible assets related to CircuLite
and WorldHeart during the quarters ended March 31, 2016 and March
31, 2015.
|
(c)
|
Represents
restructuring costs comprised of lease exit costs, employee
severance, abandoned fixed assets and contract termination charges
primarily related to the CircuLite acquisition of $20,000 and $2.6
million during the quarters ended March 31, 2016 and 2015,
respectively.
|
|
|
The terms "non-GAAP
net loss" and "non-GAAP net loss per common share" refer to GAAP
net loss and GAAP net loss per common share excluding certain
adjustments such as amortization of purchased intangible assets,
impairment charges, purchase accounting and acquisition-related
transaction costs, and restructuring and severance costs as
follows:
|
|
1)
|
We exclude
amortization of purchased intangible assets and periodic impairment
charges related to long-lived assets from this measure because such
charges do not represent what our management believes are the costs
of developing, producing, supporting and selling our products and
the costs to support our internal operating structure.
|
2)
|
We exclude purchase
accounting adjustments and acquisition-related costs from this
measure because they occur as a result of specific events and are
not reflective of our internal investments and the ongoing costs to
support our operating structure. Purchase accounting
adjustments include contingent consideration fair market value
adjustments.
|
3)
|
We exclude
restructuring and severance costs from this measure because they
tend to occur as a result of specific events such as acquisitions,
divestitures, repositioning our business or other unusual events
that could make comparisons of long-range trends difficult and are
not reflective of our internal investments and the costs to support
our operating structure.
|
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SOURCE HeartWare International, Inc.