Merit Medical second-quarter revenues increase 16% to $74.9 million

Jul 29 2010

Merit Medical Systems, Inc. (Nasdaq:MMSI), a leading manufacturer and marketer of proprietary disposable medical devices used in interventional and diagnostic procedures, particularly in cardiology, radiology and gastroenterology, today announced record revenues of $74.9 million for the quarter ended June 30, 2010, an increase of 16% over revenues of $64.8 million for the quarter ended June 30, 2009. Revenues for the six-month period ended June 30, 2010 were a record $142.4 million, compared with $123.2 million for the corresponding period in 2009, a gain of 16%.

Net income for the quarter ended June 30, 2010 was $5.7 million, or $0.20 per share, compared to $5.8 million, or $0.21 per share, for the comparable quarter of 2009. Net income for the quarter ended June 30, 2010 was net of $697,000 (after-tax) of one-time expenses related to Merit's proposed acquisition of BioSphere Medical, Inc. ("BioSphere").

Net income for the six-month period ended June 30, 2010 was $10.2 million, or $0.36 per share, compared to $11.4 million, or $0.40 per share, for the corresponding period of 2009.  This decrease can be attributed primarily to the costs of hiring additional sales and marketing people, the proposed BioSphere acquisition, research and development of the Endotek product line and a legal settlement.

In the second quarter of 2010, compared to the second quarter of 2009, catheter sales increased 30%; stand-alone device sales rose 17%; inflation devices sales grew 15%; Endotek sales increased 10%; and custom kit and tray sales rose 8%. 

For the six-month period ended June 30, 2010, compared to the six months ended June 30, 2009, catheter sales grew 26%; stand-alone device sales rose 18%; custom kit and tray sales grew 10%; and inflation device sales increased 7%. 

Gross margins for the second quarter of 2010 were 43.3% of sales, compared to 43.4% of sales for the second quarter of 2009. Gross margins for the second quarter of 2010 improved 110 basis points sequentially compared to gross margins of 42.2% of sales for the first quarter of 2010, primarily due to a shift from negative to positive production variances in recent months. Gross margins for the six-month period ended June 30, 2010 were 42.8% of sales, compared to 43.0% of sales for the corresponding period of 2009.  

Selling, general and administrative expenses for the second quarter of 2010 were 26.6% of sales, compared to 25.1% of sales for the second quarter of 2009. This increase can be attributed primarily to $1.1 million (pre-tax) of costs related to the proposed BioSphere acquisition. For the six-month period ended June 30, 2010, selling, general and administrative expenses were 27.4% of sales, compared with 25.3% of sales for the first six months of 2009. This increase can be attributed primarily to the costs of hiring additional sales and marketing people, the proposed BioSphere acquisition and a legal settlement.

Research and development costs during the second quarter of 2010 were 5.0% of sales, compared to 4.5% of sales for the second quarter of 2009. Research and development costs were 4.8% of sales for the first six months of 2010, compared to 4.0% of sales for the same period of 2009. The increase in research and development costs for both periods can be attributed primarily to development of the Endotek product line.

"We are extremely pleased with the sales results for the second quarter of 2010," said Fred P. Lampropoulos, Merit's Chairman and Chief Executive Officer. "We believe, based on the quarter and particularly our June results, that operating leverage opportunities will be available if our sales momentum continues."

"Additionally, we have received the CE mark on our ASAP™ thrombus removal catheter and have received favorable responses from physicians in Europe. A first quarter 2011 launch, subject to FDA approval, is anticipated," Lampropoulos continued. "A number of new products, such as the Finale™ radial compression device, the Impress® hydrophilic catheter, and the Tram™ integral transducer and manifold, were all successfully launched. We are also very pleased with the Laureate™ hydrophilic guide wire which is being accepted well and gaining strength against the current market leader."

Merit's effective tax rate for the second quarter of 2010 was 35.3%, compared with 35.0% for the second quarter of 2009. For the six-month period ended June 30, 2010, Merit's effective tax rate was 32.6%, compared to 33.3% for the same period of 2009. The lower tax rate for the six months ended June 30, 2010 was due primarily to higher profits from Merit's Irish operations, which are taxed at a lower rate in Ireland than our U.S. operations.

Management anticipates that the proposed BioSphere acquisition will close in the third quarter of 2010.