Synovis Life Technologies third quarter net revenue increases 19% to record $21.0 million

Aug 24 2011

Synovis Life Technologies, Inc. (Nasdaq: SYNO), today reported its financial results for the fiscal third quarter ended July 31, 2011.

“Our strong portfolio of soft tissue repair products has proven again that it is a powerful generator of revenue growth and profitability”

For the quarter, net revenue rose to a record $21.0 million, a 19 percent increase over $17.6 million in the year-ago period. Operating income for the third quarter totaled $3.0 million, a 32 percent gain over operating income of $2.3 million in the year-ago period, chiefly due to higher revenue. Net income for the fiscal 2011 third quarter was $2.0 million, or $0.17 per diluted share, compared to net income of $1.5 million, or $0.13 per diluted share, in the fiscal 2010 third quarter.

"Our strong portfolio of soft tissue repair products has proven again that it is a powerful generator of revenue growth and profitability," said Richard Kramp, Synovis Life Technologies president and chief executive officer. "For the 17^th consecutive quarter, in a challenging healthcare economic climate, we have posted double-digit sales gains and established a firm foundation for continued growth. We are very pleased with the performance of our products in the large and competitive markets where we continue to build a favorable reputation."

In the first nine months of fiscal 2011, net revenue rose to $60.3 million, up 20 percent from $50.4 million in the same period of the prior fiscal year. Operating income for the first three quarters of fiscal 2011 was $8.2 million, up 61 percent from operating income of $5.1 million in the same period of last year. Net income was $5.7 million in the first nine months of fiscal 2011, or $0.50 per diluted share, compared to $3.4 million, or $0.30 per diluted share, in the first nine months of fiscal 2010.

Third Quarter Fiscal 2011 Highlights

Highlights for the third quarter include the following:

• Peri-Strips Dry^® (PSD) revenue totaled a record $6.1 million in the third quarter, a 20 percent increase from the year-ago period. The number of gastric sleeve procedures performed is on the rise as private insurance companies increasingly reimburse for this cost-effective surgery. The longer staple line associated with the gastric sleeve requires more stapler firings and, therefore, more buttresses per procedure. Because of the risks associated with a longer staple line, surgeons more frequently use a buttress in these cases.
• Revenue from Veritas was $3.9 million in the third quarter, a 7 percent increase over the same period of the prior year. Veritas is primarily sold for ventral hernia and breast reconstruction — both large and attractive markets. Veritas has been shown to remodel more readily than dermal-based products in published head-to-head in vivo studies. Veritas is a highly differentiated product with a collagen matrix based on pericardial tissue, rather than dermal tissue. "We are working with our implanting surgeons on publishing clinical data in peer-reviewed journals as we inform physicians about the advantages of our stable, minimally elastic matrix for patients," said Kramp.
• Revenue from Microsurgical products was up 45 percent, growing to a new high of $4.0 million in the third quarter. Sales of the Coupler and Flow Coupler^® products rose 52 percent. Growth was driven by unit volume increases fueled by strong demand for the more natural DIEP breast reconstruction procedures. Physicians continue to embrace the clinical benefits of the Coupler products, as well as the value proposition that they offer in terms of shorter procedure times and less operating room time.
• Revenue from our Tissue Guard products totaled a record $4.8 million in the third quarter, a 12 percent increase from the third quarter of fiscal 2010. This gain was attributable to higher units sold, as well as higher average selling prices.
• Orthopedic and Wound product revenue totaled $799,000 for the third quarter, up 36 percent from a year ago. Sales of Unite^® Biomatrix, used to treat chronic wounds, was responsible for the growth. Toward the end of the third-quarter, Synovis named Rich Lanigan, a highly experienced medical device professional with both operational and sales experience, general manager of the Orthopedic and Wound business. He is focused on top-line growth and achieving profitability.
• The third quarter gross margin was 72 percent, consistent with the same period last fiscal year.
• Selling, general and administrative expenses totaled $11.1 million in the third quarter, up 16 percent from $9.5 million in the year-ago quarter. The increase in SG&A was driven largely by investments in sales and marketing personnel expenses, as well as initiatives to grow revenue.
• Research and development (R&D) expenses totaled $1.1 million in the third quarter, versus $896,000 in the year-ago period. R&D investment supported various product development initiatives.
• Operating income reached $3.0 million in the third quarter, a 32 percent increase compared to the third quarter of last year.

Balance Sheet and Cash Flow

• Cash and investments totaled $68.8 million as of July 31, 2011, or $5.96 per share, up from $61.9 million at the end of fiscal 2010.
• Operating activities provided cash of approximately $6.4 million in the first nine months of fiscal 2011, up from $3.4 million in the year-ago period.

Source Synovis Life Technologies