Cambridge Heart's fourth-quarter total revenue down 20%

Cambridge Heart, Inc.Mar 31 2010

Cambridge Heart, Inc. (OTCBB: CAMH), today reported results for its fourth quarter and year ended December 31, 2009. Full financial statements and corresponding commentary can be found in the Company's Form 10-K, which is expected to be filed with the Securities and Exchange Commission on March 31, 2010. The following financial, strategic and clinical milestones highlight the fourth quarter and subsequent weeks:

“We are pleased with the pace of progress in the development of our new OEM module. We are on schedule to launch our OEM product in collaboration with our partner Cardiac Science in the third quarter of 2010.”

• Revenue - Revenue for the fourth quarter was $805,000, slightly up compared to $798,000 in the third quarter of 2009. A total of 15 Heartwave II systems were sold or placed domestically in the fourth quarter.
• MTWA Module Distribution Update - In February 2010, the Company completed the product development phase of the MTWA Module and submitted a 510(k) application for regulatory approval with the U.S. Food and Drug Administration. The Company expects to launch the product with Cardiac Science in the third quarter of 2010.
• Private Placement - In December 2009, the Company completed a private placement of Series D Convertible Preferred Stock, raising net proceeds of approximately $1.8 million. In addition to the Series D Preferred Stock, the Company issued a short-term warrant and a long-term warrant for the purchase of common stock to each investor. If the short-term warrants, which expire on December 23, 2010, are exercised, an additional $1.2 million in capital would be raised. If at anytime during the term of the long-term warrants, which expire on December 23, 2015, the Company's common stock trades at $0.284 per share or higher for a period of 20 consecutive trading days, the Company can call the remaining long-term warrants, which could generate additional capital of approximately $900,000.
• Cash Expense Reductions - In order to reduce costs and streamline the decision-making process, the Company, in December 2009, reduced the size of its Board of Directors from seven members to five. Furthermore, in March 2010, the Company implemented the following cost cutting initiatives:
  • Replaced 10 percent of senior management's salaries and 100 percent of senior management's 2009 earned cash bonuses with options to purchase shares of common stock of the Company;
  • Reduced the annual retainer paid to directors and eliminated per meeting fees, which is expected to reduce board related cash compensation by 50 percent. In recognition of this reduction in fees, the Company awarded each director options to purchase shares of common stock of the Company; and
  • Scaled back the level of consultative services across all functions of the Company, and renegotiated certain advisory rates for 2010.

• Clinical Study Update - In February 2010, the results of a clinical study were presented at the 29th Annual Scientific Meeting of the Belgian Society of Cardiology in Brussels, Belgium. The study, conducted at Jolimont Hospital in Haine Saint Paul, Belgium, prospectively evaluated MTWA in 73 consecutive patients who met criteria for implantable cardioverter defibrillator implantation for primary prevention of sudden cardiac death (SCD). At a mean follow-up time of 39 months, the incidence of arrhythmic events in patients with an abnormal MTWA test was 7.6 times that for patients who tested negative. SCD was 4.8 times more common in those with an abnormal MTWA result.
• Other Developments - In December 2009, the Company filed three patent applications with the U.S. Patent Office to further enhance its intellectual property portfolio. These applications cover aspects of the Company's intellectual property in the areas of measuring Alternans from ambulatory electrocardiographic devices (i.e. Holter monitoring equipment), Alternans and cardiac ischemia, and Alternans and pharmacological agents.

Commenting on the results of the quarter and recent events, Cambridge Heart CEO Ali Haghighi-Mood said, "Our fourth quarter revenue remained stable and in line with our expectations despite continued economic challenges impacting the capital equipment market and uncertainty surrounding healthcare reimbursement." Mr. Haghighi-Mood added, "We are pleased with the pace of progress in the development of our new OEM module. We are on schedule to launch our OEM product in collaboration with our partner Cardiac Science in the third quarter of 2010."

Financial Results for the fourth quarter and year ended December 31, 2009

Total revenue for the fourth quarter ended December 31, 2009 was $805,000, a decrease of 20% from total revenue of $1,012,000 reported during the same period of 2008. On a sequential basis, total revenue increased $7,000 or 1%, from total revenue of $798,000 for the quarter ended September 30, 2009. The decrease in revenue compared to the 2008 period was the result of a number of factors including weak economic conditions and uncertainty about healthcare reform and reimbursement, which had a significant adverse impact on medical capital equipment sales in 2009 as a whole.

Cost of sales for the fourth quarter of 2009 was $430,000, which includes a $27,000 charge to reserve for potentially excess inventory, compared to $1,497,000 in the same period in 2008, which included a $921,000 charge to reserve for potentially excess inventory. The reserve is based on the uncertainty that the Company will realize the full value of the existing inventory over the next 12 months. The inventory was built up in order to satisfy our contractual obligations under the former co-marketing agreement with St. Jude Medical.

Selling, general and administrative expenses for the fourth quarter of 2009 were $1,998,000, a decrease of $377,000, or 16%, compared to $2,375,000 in the fourth quarter of 2008. The decrease in SG&A expense is primarily driven by the reduction in headcount in March 2009 and lower variable selling expenses as a result of lower sales of commissionable products in the U.S.

The operating loss for the fourth quarter of 2009 was $1,746,000, compared to an operating loss of $3,009,000 for the same period last year. Included in the operating loss for the fourth quarter of 2009 was $519,000 of non-cash stock-based compensation expense, and a $27,000 reserve for potentially excess inventory. Excluding the inventory reserve, the operating loss for the fourth quarter of 2009 was $1,719,000. The net loss attributable to common stockholders for the quarter was $1,840,000, which includes a $107,000 expense related to the beneficial conversion feature associated with the Series D Preferred Stock, or $0.03 per share, compared to a net loss of $2,981,000, or $0.05 per share, in the comparable 2008 period.

For the year ended December 31, 2009, total revenue was $3,232,000, a decrease of $1,007,000, or 24%, compared to total revenue of $4,239,000 for the same period in 2008. Gross margin as a percent of revenue for the year ended December 31, 2009 was 43% compared to 25% in 2008. This increase in gross margin is primarily due to the $921,000 inventory reserve provision, recorded in 2008, in connection with inventory built up to satisfy our contractual obligations under the arrangement with St. Jude Medical. Selling, general and administrative expenses for the 12-month period in 2009 were $8,380,000 compared to $10,862,000 in 2008. The operating loss for 2009 of $7,371,000, which included a $27,000 inventory reserve, decreased $2,973,000 compared to an operating loss of $10,344,000, which included the $921,000 inventory reserve, for the same period in the prior year. The operating loss attributable to common stockholders for 2009 included $2,026,000 in non-cash stock based compensation expense. The net loss attributable to common stockholders for the year ended December 31, 2009 was $7,456,000, which includes a $107,000 expense related to the beneficial conversion feature associated with the Series D Preferred Stock, or $0.12 per share, compared to a net loss of $10,030,000, or $0.16 per share, during 2008.

The Company ended the fourth quarter with cash and cash equivalents of $3,159,000. The cash used by operations was $1,229,000 and $4,832,000, respectively, for the quarter and 12 months ended December 31, 2009. The Company believes that the existing resources and currently projected financial results, which include sales of the MTWA Module and Micro-V Alternans Sensors to Cardiac Science, are sufficient to fund operations through December 31, 2010. The projections do not include the potential proceeds of up to $2.1 million from the exercise of common stock warrants outstanding that were issued in connection with the Series D Private Placement.

The Company currently has a total of 92.7 million shares of common stock and common stock equivalents issued and outstanding, including the effect of converting the Series C-1 preferred stock and the Series D preferred stock into shares of common stock. In addition, there are options and warrants outstanding to purchase 24 million shares of common stock, bringing the fully diluted share count to 116.7 million shares of common stock. In March 2010, the Company granted stock option awards to certain employees, directors and consultants of the Company to purchase an aggregate of 7 million shares of common stock of the Company. In connection with the approval of certain of the awards, stock options to purchase an aggregate of 3 million shares of common stock of the Company previously granted to members of senior management were cancelled.