Conceptus second-quarter 2010 net sales increase 11.5% to $36.8 million

Conceptus, Inc. (Nasdaq:CPTS), developer of the Essure^(R) procedure, the first proven non-surgical permanent birth control method available, today reported financial results for the three months ended June 30, 2010.

“August 5, 2010 Conceptus 2010 Second Quarter Financial Results.”

Net sales for the second quarter of 2010 were $36.8 million, an increase of 11.5% over net sales of $33.0 million for the second quarter of 2009. Net sales were within the Company's revised guidance of $36.8 million to $36.9 million issued in July of this year, but were below the Company's original guidance of $39.5 million to $41.0 million issued in April of 2010.

The Company reported a net loss for the second quarter of 2010 of $0.3 million, or ($0.01) per share, compared with a net loss in the same period of 2009 of $0.6 million, or ($0.02) per share. These results were consistent with the Company's revised net loss guidance of ($0.02) to ($0.01) per share, although below the Company's original guidance of $0.00 to $0.03 per diluted share issued in April of 2010. Non-GAAP net income for the second quarter of 2010 was $3.5 million, or $0.11 per diluted share, compared with non-GAAP net income for the prior year second quarter of $2.4 million, or $0.08 per diluted share.

Compared with the prior year second quarter, domestic sales of the Essure system increased 7.4% to $28.0 million and international sales increased 26.5% to $8.9 million. Domestic sales growth reflects continued increases in both the number of physicians entering and completing training and in the number of certified physicians performing the Essure procedure in-office. During the second quarter of 2010, the Company entered approximately 400 physicians into preceptorship, certified approximately 330 physicians and transitioned approximately 160 physicians to performing procedures in the office setting. Approximately 11,750 physicians have performed at least one Essure procedure. Of total Essure-trained physicians, 44% are performing the Essure procedure in sites of minimal anesthesia, representing 66% of total procedure volume in the second quarter of 2010, which is consistent with the immediately preceding quarter and a 400 basis point increase over the prior year second quarter. International sales growth was negatively impacted by a stronger U.S. dollar in the current period compared with a year ago. International unit volume growth was 35% compared with the second quarter of 2009.

Gross profit for the second quarter of 2010 was $29.6 million, compared with $26.4 million for the second quarter of 2009. Gross profit margin was 80% of net sales for the second quarter of 2010, consistent with the second quarter of 2009. Sequential gross profit margin decreased slightly from 81% in the first quarter of 2010 and 82% in the fourth quarter of 2009, primarily due to a higher percentage of lower-margin international sales as well as the stronger U.S. dollar in the second quarter of 2010. Total operating expenses for the second quarter of 2010 were $28.1 million, up from $25.3 million for the second quarter of 2009, reflecting increased spending on field sales, consumer marketing and legal fees.

Cash, cash equivalents and investments were $91.1 million as of June 30, 2010, a decrease of $8.2 million from March 31, 2010. In the second quarter of 2010 the Company repaid $11.5 million of its outstanding short-term loan balance with UBS Financial Services. Subsequent to the end of the quarter, the Company repaid in its entirety the remaining $14.2 million.

Financial Guidance

Conceptus also announced financial guidance for the third quarter of 2010 and affirmed recent full year 2010 guidance, as follows:

• Net sales: the Company expects net sales in the third quarter to be in the range of $33.0 million to $34.0 million, and affirms guidance for net sales for the full year to be in the range of $143.0 million to $145.0 million.
• GAAP EPS: the Company expects third quarter GAAP diluted EPS to be in the range of $0.03 to $0.06 based on 32.3 million weighted average common shares outstanding, and affirms guidance for full year GAAP earnings to be in the range of $0.21 to $0.26 per diluted share.
• Non-GAAP EPS: the Company expects third quarter non-GAAP diluted EPS to be in the range of $0.15 to $0.18, and affirms guidance for full year non-GAAP earnings to be in the range of $0.70 to $0.75 per diluted share.

"As communicated in July of this year, our growth slowed further in the second quarter as lingering unemployment and other factors caused broad-based declines in U.S. physician office visits," commented Mark Sieczkarek, president and chief executive officer of Conceptus. "In addition, lower physician metrics caused by our response to competitive trialing impacted our rate of growth. To manage this, we expanded our field sales force early in the third quarter, which we expect will enable us to more effectively compete in existing Essure accounts, as well as drive the physician metrics of preceptorship and certification. Our financial guidance is reflective of this process, which is well underway."