Stereotaxis fourth quarter net loss increases to $5.5M

Stereotaxis, Inc. (NASDAQ: STXS) today reported financial results for the fourth quarter and full year ended December 31, 2011.  

Management Comments

"While 2011 was challenged by the transition to a new robotic platform, we are confident the strategic initiatives we put in place will lead to improved operating performance and financial results beginning in 2012," said Michael P. Kaminski, President and Chief Executive Officer of Stereotaxis. "We are focused on leading the company on a path to profitability and will continue to take the necessary steps to improve our financial position."

Kaminski continued, "After much anticipation, we were excited to launch our next generation Niobe® ES, or Epoch™ system, in December and are encouraged by the positive initial results and validation from multiple physician users. The Niobe ES system is designed to transform the practice of electrophysiology (EP), and we believe it provides a strong competitive advantage in terms of efficiency and safety. To date, we have upgraded 21 sites and anticipate solid market traction and system revenue growth this year based on the significant early market interest."

"The recognized value of our robotic technology for complex ablations in the EP lab was further evidenced by 23% growth in utilization for complex procedures in 2011. Overall, utilization grew 11% and contributed to record levels of recurring revenue during the year.

"Moving forward, our immediate priority is to address the capital needs of the company, including securing an extension of our credit agreement with Silicon Valley Bank and one or more additional capital transactions, as well as leveraging the commercial appeal of our technology. An intense focus on capitalization, and securing adequate funds in our financing activities, will be fundamental to our ongoing success and our ability to leverage the positive feedback on our new platform to support our future growth in what we believe will be a high-demand, global market," concluded Kaminski.    

2011 Financial Results

Fourth Quarter

Revenue for the fourth quarter 2011 totaled $11.6 million, compared to $14.5 million in the fourth quarter 2010 and $8.5 million in the third quarter 2011. The Company realized revenue of $2.3 million in Niobe system sales and $1.8 million in Odyssey™ system sales in the fourth quarter 2011. Recurring revenue in the quarter improved 18% from the year-ago quarter to a record high $7.4 million.    

The Company generated global new capital orders of $3.6 million in the fourth quarter, comprised of one new Niobe ES system, 11 Niobe ES system upgrades, three Vdrive™ robotic navigation systems and $1.4 million in orders related to the Odyssey system. This compares to $11.4 million in global new capital orders in the fourth quarter 2010 and $2.2 million in the third quarter 2011.

Gross margin in the quarter was 71.4% of revenue or 73.2% excluding a $0.2 million charge related to the under absorption of overhead based on normal production levels. Gross margin in the fourth quarter 2010 was 73.4% of revenue and 68.9% in the third quarter 2011.

Operating expenses were $12.9 million in the fourth quarter, down $1.2 million from the year ago period and down $2.0 million sequentially. At the end of 2011, the Company had reduced its annualized operating expense run rate by 20%, primarily through headcount and discretionary spending cuts during the second half of the year.

The net loss for the fourth quarter was $(5.5) million, or $(0.10) per share, compared to a net loss of $(2.5) million, or $(0.05) per share, reported for the fourth quarter 2010 and $(7.3) million, or $(0.13) per share, in the third quarter 2011. The weighted average shares outstanding for the fourth quarter of 2011 totaled 54.9 million, compared with 52.5 million in the fourth quarter 2010 and 54.9 million in the third quarter of 2011.  

Cash burn for the fourth quarter 2011 was $14.8 million, which included the Company's final repayment of the Biosense Webster, Inc. (BWI) advance of $3.1 million and higher working capital of $7.5 million, of which $6.6 million related to increased accounts receivable.

Full Year

For the full year 2011, total revenue was $42.0 million compared with $54.1 million in 2010. The decline was primarily due to softness in Niobe robotic system sales as the Company transitioned from the Niobe II system to its new Epoch platform. Systems revenue was $15.6 million for the year and 2011 capital orders were $17.3 million.  

Conversely, recurring revenue increased 15.1% over the previous year to $26.4 million, a result of strong utilization growth that led to greater disposable sales and service contracts. During 2011, a total of 9,842 EP procedures were performed with the Niobe system worldwide, a 10.8% increase from 2010. For complex cardiac ablations, the Company recognized a 23.3% increase in utilization over the prior year.

Gross margin for the full year 2011 was 70.2% of revenue compared to 71.2% in 2010, and was positively impacted by a higher mix of recurring revenue, which averaged an 85.1% gross margin. Excluding a $0.6 million charge related to the under absorption of overhead based on normal production levels, gross margin was 71.7% for the full year 2011.

Operating expenses were $61.4 million for the full year 2011, an increase of $4.0 million from the year ago period. The rise relates to the development of Niobe ES and Odyssey system upgrades, headcount to support higher utilization rates and increased spending on registrations in Japan as Niobe ES system approaches the end of clinical trials.

The net loss for full year 2011 was $(32.0) million, or $(0.58) per share, compared to a net loss of $(19.9) million, or $(0.39) per share, reported for 2010. The weighted average shares outstanding for full year 2011 totaled 54.8 million, compared with 50.5 million in 2010.    

At December 31, 2011, Stereotaxis had cash and cash equivalents of $14.0 million, compared to $35.2 million at December 31, 2010. At year end, total debt was $38.5 million, including $15.2 million related to Cowen Healthcare Royalty Partners (Cowen) financing in the fourth quarter.

Capitalization

On November 30, 2011, the Company secured up to $20 million in financing through Cowen of which $15 million has been funded to date, with another $5 million that may be borrowed in 2012 if the Company is able to achieve certain Niobe ES system shipment milestones. Under the terms of the facility, the Company is obligated to repay the Cowen debt, which accrues interest at 16% and matures December 31, 2018, using BWI catheter royalties.

The Company anticipates that its lower cost structure and the expected rebound in revenue will improve cash flow and reduce capital requirements. The Company is also working to secure additional financing and is actively looking at and considering a number of potential alternatives.  Successfully completing these steps in the near term will be fundamental for the Company to continue to be able to drive its business model forward as planned.

Clinical Results

As of February 25, 2012, the Company has documented 386 total procedures using the Epoch system at 16 different centers around the world. A total of 42 physicians have participated in this clinical experience. The majority of these procedures, 70%, are atrial fibrillation ablation patients. Reported case times average slightly over three hours, an average improvement of 25 minutes from the Niobe II system. Feedback continues to be overwhelmingly positive, with operators noting an improvement in efficiency due to Niobe ES system in 92% of cases.

2012 Milestones

Stereotaxis provided the following milestones for 2012:

• Complete additional capital raise and secure extended credit agreement with Silicon Valley Bank
• Achieve at least 10 new Niobe ES system sales
• Complete 40 Niobe ES system upgrades during first half of the year

SOURCE Stereotaxis, Inc.