IVAX Diagnostics net revenues decrease 0.4% to $4,375,000 for quarter ended June 30, 2011

Aug 23 2011

IVAX Diagnostics, Inc. (NYSE Amex:IVD), a fully integrated in vitro diagnostics company, reports its financial results for the quarter ended June 30, 2011.

Kevin D. Clark, Chief Executive Officer, Chief Operating Officer and President of IVAX Diagnostics, said, "We are pleased to report our financial performance for the second quarter of 2011. Our operating expenses and operating loss were lower in the second quarter of 2011 compared to the corresponding period in 2010. Our revenues for the second quarter of 2011 were approximately at the same level as the second quarter of 2010. Our cash and cash equivalents balance improved from $1.8 million as of December 31, 2010 to $5.2 million as of June 30, 2011.

Mr. Clark continued, "The improvement in our liquidity position is primarily the result of the previously announced consummation of the initial transactions contemplated by our stock purchase agreement with ERBA Diagnostics Mannheim GmbH, an in vitro diagnostics company headquartered in Germany which, as of the date of the stock purchase agreement, beneficially owned, directly or indirectly, approximately 72.4% of the then-issued and outstanding shares of our common stock. At the initial closing of the investment contemplated by the stock purchase agreement, we issued to ERBA Diagnostics Mannheim 6,666,667 shares of our common stock for an aggregate purchase price of $5,000,000, or $0.75 per share, and we also issued to ERBA Diagnostics Mannheim warrants, which have a five-year term and an exercise price of $0.75 per share, to purchase an additional 20,000,000 shares of our common stock. As previously announced, under the terms of the stock purchase agreement, we have also agreed to issue to ERBA Diagnostics Mannheim an aggregate of an additional 13,333,333 shares of our common stock for an aggregate purchase price of $10,000,000, or $0.75 per share, in two equal installments, the first of which installment is to be consummated on or prior to January 1, 2012 and the second of which installment is to be consummated on or prior to July 1, 2012. Our liquidity position also improved during the second quarter of 2011 as a result of Diamedix Corporation, our wholly-owned subsidiary in Miami, Florida, entering into a secured, revolving credit facility of up to $975,000 with City National Bank of Florida.

Mr. Clark continued, "Our initiatives to improve our operating results and performance are ongoing. We have made placements at customer sites in the U.S. of the Mago^® 4S, our next-generation fully-automated Enzyme-linked Immunosorbent Assay (ELISA) and Immunofluorescence Assay (IFA) instrumentation system, which received clearance from the United States Food and Drug Administration (FDA) during January 2011. Further, as previously announced, Diamedix entered into a three-year distribution agreement with Laboratory Supply Company (LABSCO) earlier this month which provides for LABSCO to act as a distributor in the U.S. for Diamedix' suite of instrumentation systems and test kits, including the Mago® 4S. LABSCO is the largest privately-held supplier of diagnostic instrumentation and clinical laboratory products to hospitals, physician office laboratories, reference labs and other non-acute care settings in the U.S. This agreement is anticipated to expand our market reach into the 3,900 hospitals in the U.S. with less than 150 beds, a new market segment on which we have not previously focused with our existing sales force. Our decision to engage LABSCO on a nationwide basis under this distribution agreement is another step toward one of our strategic goals directed at increasing our presence in the U.S.

Mr. Clark concluded, "We will continue with our efforts to reduce manufacturing costs and carefully manage our operating expenses while implementing other initiatives designed to improve sales in the U.S. and in other markets."

Financial Highlights for the Quarter and Six Months Ended June 30, 2011

Net revenues for the quarter ended June 30, 2011 were $4,375,000 compared with $4,394,000 in the same period of 2010, a decline of $19,000, or 0.4%. This decrease was composed of a decrease of $57,000 in net revenues from domestic operations, partially offset by an increase of $38,000 in net revenues from European operations, which includes a $102,000 increase related to the impact on European revenues of the fluctuation of the U.S. dollar relative to the Euro. As measured in Euros, net revenues from European operations for the second quarter of 2011 decreased by 11.3% compared to the same period of 2010 primarily as a result of volume declines. Net revenues from domestic operations for the second quarter of 2011 decreased by 1.8% compared to the same period of 2010 primarily due to declines in volumes of raw material and instrument sales, partially offset by an increase in reagent sales. Net revenues in the six months ended June 30, 2011 decreased by $540,000, or 6.0%, from the same period of 2010. This decrease was composed of decreases of $307,000 in net revenues from domestic operations and $233,000 in net revenues from European operations. The impact on European revenues of the fluctuation of the U.S. dollar relative to the Euro was an increase of approximately $144,000. As measured in Euros, net revenues from European operations for the six months ended June 30, 2011 decreased by 13.2% compared to the same period of 2010 primarily due to reagent volume declines. Net revenues from domestic operations for the six months ended June 30, 2011 decreased by 5.0% compared to the same period of 2010 primarily as a result of declines in volumes of antigen and instrument sales, while reagent sales remained at approximately the same level.

Gross profit for the quarter ended June 30, 2011 increased by $25,000 to $2,360,000 from $2,335,000 in the same period of 2010. Gross profit as a percentage of net revenues increased to 53.9% for the second quarter of 2011 from 53.1% for the same period of 2010, principally as a result of higher sales of reagents in the second quarter of 2011 by our domestic operations, which enabled additional absorption of fixed overhead. Gross profit for the six months ended June 30, 2011 decreased by $348,000, or 7.2%, from the same period of 2010. The decrease in gross profit was primarily attributable to the decline in net revenues, as described above. Gross profit as a percentage of net revenues decreased to 52.6% in the six months ended June 30, 2011 from 53.3% in the same period of 2010, mainly due to lower margins at our European subsidiary.

Operating expenses decreased in the quarter and six months ended June 30, 2011 compared to the same periods of 2010, in each case as a result of a decrease in general and administrative expenses, partially offset by increases in selling expenses and research and development expenses. For the quarter ended June 30, 2011, operating expenses decreased by $60,000 to $3,521,000 from $3,581,000 in the same period of 2010. This decrease was composed of a $324,000 decrease in general and administrative expenses, a $247,000 increase in selling expenses and a $17,000 increase in research and development expenses. For the six months ended June 30, 2011, operating expenses decreased by $306,000 to $6,643,000 from $6,949,000 in the same period of 2010. This decrease was comprised of a $619,000 decrease in general and administrative expenses, a $177,000 increase in selling expenses and a $136,000 increase in research and development expenses. The decreases in general and administrative expenses primarily related to severance costs incurred during the 2010 periods, as well as a decrease in the number of executive officers and other reductions in spending for general and administrative expenses during the 2011 periods. Selling expenses increased primarily due to salaries for newly hired sales personnel and marketing expenses related to the launch of new products and trade shows. The increases in research and development expenses were due principally to an increase in new product development activities, including additional staff allocated to research and development activities.

Loss from operations totaled $1,161,000 in the quarter ended June 30, 2011 as compared to loss from operations of $1,246,000 in the same period of 2010. Loss from operations totaled $2,168,000 in the six months ended June 30, 2011 compared to loss from operations of $2,127,000 in the same period of 2010. Net loss for the quarter ended June 30, 2011 was $767,000, or ($0.03) per share, compared to net loss of $1,311,000, or ($0.05) per share, in the same period of 2010. Net loss for the six months ended June 30, 2011 was $1,787,000, or ($0.06) per share, compared to net loss of $2,268,000, or ($0.08) per share, in the same period of 2010.

Source: IVAX Diagnostics, Inc.