Neovasc Inc. (TSXV: NVC), today
announced financial results for the three months ended March 31, 2012.
"We are pleased to report that all three lines of our tissue business
reported healthy revenue gains in the first quarter of 2012 compared to
the same period in 2011," commented Alexei Marko, CEO of Neovasc. "Our
tissue product sales are on track and there was robust demand for our
consulting services during the quarter. We also saw good gains in our
contract manufacturing revenues, reflecting our success in attracting
new customers as well as in booking larger orders from existing
customers as they advance their new product development programs,
particularly in the area of transcatheter aortic valve replacement."
Mr. Marko continued, "As planned, we made significant R&D investments in
the first quarter, as we continued patient enrolment in the Neovasc
Reducer™ COSIRA trial and established patient registries intended to
support European commercialization and international product
registration efforts. The COSIRA trial is proceeding well and we look
forward to presenting the results once completed. We also continued to
ramp up our preclinical Tiara™ mitral valve program and results of
early testing were presented at three sessions at EuroPCR, the major
European interventional cardiology meeting. Despite the early stage of
the Tiara program, these sessions attracted considerable attention,
reinforcing our view that Tiara may have significant potential in
providing a treatment for mitral regurgitation, a challenging and
poorly served condition. We currently are on track to achieve the
first Tiara implantations in humans in 2013."
Results for the three months ended March 31, 2012 and 2011 follow:
Revenues
Revenues increased 46% year-over-year to $1,712,991 for the three months
ended March 31, 2012, from $1,169,920 for the same period in 2011.
Product sales for the first quarter of 2012 were $709,642, compared to
product sales of $550,681 in the same period of 2011, an increase of
29%. The increase in product sales primarily reflects higher demand
from one of Neovasc's largest customers, who distributes the Company's
Peripatch™ strips and patches and is achieving higher penetration in
both the North American and European markets.
Contract manufacturing revenues were $341,447 in the first quarter of
2012, compared to contract manufacturing revenues of $290,251 in the
comparable period in 2011, an increase of 18%. The increase in
contract manufacturing revenues reflects the Company's success in
attracting more contract manufacturing customers as well as larger
orders from existing customers as they advance their new product
development programs.
Revenues from consulting services for the three months ended March 31,
2012 were $661,902, compared to consulting service revenues of $328,988
in the same period in 2011, representing an increase of 101%. The
Company's consulting service revenues are contract-driven and they can
fluctuate from quarter to quarter and year to year as current projects
are completed and new projects start.
Cost of Goods Sold
The cost of goods sold for the three months ended March 31, 2012 were
$879,272, as compared to $665,776 in the same period in 2011. The
overall gross margin for the first quarter of 2012 was 49%, compared to
43% gross margin in the same period in 2011. Neovasc will continue to
pursue initiatives aimed at strengthening margins, including
implementing further manufacturing efficiencies, reviewing pricing
strategies for certain products and focusing on further expanding sales
of higher margin product lines.
Expenses
Total expenses for the three months ended March 31, 2012 increased
$647,176 to $2,091,016, compared to $1,443,840 in the same period in
2011, representing an increase of 45%. The increase can be partly
explained by an increase in non-cash share-based payments of $223,868,
as discussed in the "Loss" section below. Net of these non-cash
share-based payments, total expenses increased $423,308 between the
comparable periods in 2012 and 2011, substantially due to an increase
of $346,015 in clinical trial and product development expenses for the
Company's two new product development programs.
Selling expenses were $43,227 for the three months ended March 31, 2012,
compared to $47,246 in the comparable period in 2011. The Company is
continuing to maintain relatively constant and modest selling and
marketing costs while it focuses on growing its business-to-business
revenue streams.
General and administrative expenses were $1,213,805 for the three months
ended March 31, 2012, as compared to $938,730 in the comparable period
of 2011, representing an increase of 29%. The increase in general and
administrative expenses was primarily due to an increase in non-cash
share-based payments of $191,900, as discussed in the "Loss" section
below and an increase of $83,175 in regulatory affairs expenses related
to the transition to a new notified body in Europe during the first
quarter of 2012.
Product development and clinical trial expenses were $833,984 for the
three months ended March 31, 2012, as compared to $457,864 in the
comparable period of 2011, representing an increase of 82%. The
increase in year-over-year research and development costs is
principally due to increased investment in the Company's two major new
product initiatives: the COSIRA clinical trial for the Neovasc Reducer
and the preclinical Neovasc Tiara mitral valve development program.
Loss
The loss for the three months ended March 31, 2012 was increased by
$291,837 to $1,265,291, or $0.03 basic and diluted loss per share, as
compared with a loss of $973,454 or $0.02 basic and diluted loss per
share for the comparable period in 2011.
The increase in the loss incurred in the first quarter of 2012 as
compared to the same period in 2011 is primarily the result of an
increase in non-cash share-based payments of $227,674. In the first
quarter of 2011 and 2012, the officers and directors of Neovasc were
awarded a fixed number of options under the Company's established
remuneration and incentive plans. While the actual number of options
granted in each year was equivalent, under the Black Scholes model used
to value the options, the significantly higher price of the Company's
shares in the first quarter of 2012 produced a higher overall valuation
of the options issued, and therefore resulted in a higher non-cash
charge to the income statement in 2012.
Liquidity and Capital Resources
Neovasc finances its operations and capital expenditures with cash
generated from operations, lines of credit, long-term debt and equity
financings. At March 31, 2012, the Company had cash and cash
equivalents of $690,050, as compared to cash and cash equivalents of
$1,252,497 at March 31, 2011. In addition, at March 31, 2012 the
Company had investments of $2,512,713 (March 31, 2011: $nil).
At March 31, 2012 the Company had working capital of $3,758,201 as
compared to working capital of $1,391,805 at March 31, 2011. Cash used
in operating activities was $607,797 for three months ended March 31,
2012, as compared to $274,918 for the same period in 2011. The
increase in cash used in the first quarter of 2012 compared to the same
period of 2011 is principally due to the change in working capital
items in each period. In 2012 working capital items absorbed cash of
$128,898, while in the same period of 2011 working capital items
generated cash of $145,669.
In the first quarter 2012 the Company invested $1,008,423 in longer-term
investments, as its cash and cash equivalents were sufficient to meet
its obligations in the short-term. Net cash invested in capital assets
was $93,906 for the three months ended March 31, 2012, compared to net
cash invested in capital assets of $87,892 for the same period in
2011. During the first quarter of 2012 and 2011, the Company continued
to invest capital to expand its clean room and manufacturing
facilities.
Net cash used by financing activities was $4,334 for the three months
ended March 31, 2012, compared to cash provided by financing activities
of $126,280 for the three months ended March 31, 2011. On January 17,
2011 and February 15, 2011, Neovasc issued 197,922 and 128,371 common
shares, respectively, upon the exercise of warrants issued as part of
the Company's February 2010 financing. Proceeds from the exercise of
the 326,293 warrants amounted to $130,517.