HeartWare International's revenue increases 38% to $73.2 million in Q4 2014

Feb 26 2015

HeartWare International, Inc. (NASDAQ: HTWR), a leading innovator of less invasive, miniaturized circulatory support technologies that are revolutionizing the treatment of advanced heart failure, today announced revenue of $73.2 million for the fourth quarter ended December 31, 2014, a 38% increase compared to $53.1 million in revenue for the same period of 2013. For the fiscal year 2014, the company generated revenue of $278.4 million, a 34% increase compared to revenue of $207.9 million in 2013.

During the fourth quarter, 737 HeartWare^® Ventricular Assist Systems were sold globally, compared to 524 units in the fourth quarter of 2013. U.S. revenue, generated through the sale of 382 units during the fourth quarter of 2014, was $41.5 million, a 60% increase from $25.9 million in the fourth quarter of 2013. Revenue from international markets, derived through the sale of 355 units, was $31.7 million, an increase of 17% from $27.1 million in the fourth quarter of 2013. Currency fluctuations offset total revenue performance in the fourth quarter by approximately $1.9 million, or 3.7 percentage points, compared to the fourth quarter of 2013.

"With record unit sales in the fourth quarter contributing to more than 2,750 units sold globally during 2014, as well as the addition of more than 50 hospital centers around the world, we continue to be encouraged by the growing adoption of the HeartWare System," said Doug Godshall, President and Chief Executive Officer. "During the year, we completed enrollment in our Japan bridge-to-transplant study, ramped enrollment in the supplemental cohort of our U.S. Destination Therapy study, advanced our technology pipeline, made significant upgrades to our quality systems, improved our gross margin, and concluded the year by initiating the submission process for our CE Marking Trial Application for our next-generation MVAD^® System."

"Looking ahead, 2015 promises to be a busy year as we initiate our MVAD^® System CE Marking trial, file our MVAD trial protocol in the U.S., complete enrollment in our destination therapy trial, present initial clinical data evaluating the HeartWare System as a destination therapy, and advance our HVAD^® LATERAL study evaluating the thoracotomy implant technique," Godshall added.

Gross margin percentage improved to 68.1% in the fourth quarter of 2014, as compared to 63.6% in the fourth quarter of 2013. The improvement compared to the same period in 2013 primarily reflects efficiencies associated with increased manufacturing throughput. For the year ended December 31, 2014, gross margin improved four points over the same period in 2013.

Total operating expenses for the fourth quarter of 2014 were $45.8 million, as compared to $53.3 million in the fourth quarter of 2013. Total operating expenses for the fourth quarter of 2014 include a $9.1 million reduction in the estimated fair value of future contingent consideration payments for CircuLite as a result of the Company's decision to replace CircuLite's Synergy micro pump with a version of HeartWare's MVAD for future development and commercialization. Also related to this decision, HeartWare recognized an impairment charge of $2.7 million with respect to in-process R&D acquired from CircuLite in connection with the 2013 acquisition. Total operating expenses for 2014 were $186.3 million, a four percent increase from the same period in 2013.

Research and development expense was $33.5 million for the fourth quarter of 2014, which compared to $30.3 million in the same period in 2013. The $3.2 million net increase was comprised of a $1.2 million increase in project spending, a $3.0 million increase as a result of FDA warning letter remediation costs, and a decrease of $1.0 million in non-recurring impairment charges compared to the fourth quarter of 2013.

Selling, general and administrative expenses were $21.4 million in the fourth quarter of 2014, compared to $23.0 million in the fourth quarter of 2013 which included approximately $2.9 million of CircuLite acquisition and severance expenses. Net of these prior-year expenses, selling, general and administrative expenses increased as a result of revenue growth.

Net loss for the fourth quarter of 2014 was $0.9 million, or $0.05 per basic and diluted share, compared to a net loss of $22.0 million, or a loss of $1.33 per basic and diluted share, in the fourth quarter of 2013. Net loss for the fourth quarter of 2014 includes the benefit of the $9.1 million contingent consideration fair value adjustment and the $2.7 million in-process R&D charge which are discussed above. For the fiscal year ended December 31, 2014, the company recorded a net loss of $19.4 million, or a loss of $1.14 per basic and diluted share, compared to a $59.3 million net loss, or a loss of $3.69 per basic and diluted share, in fiscal year 2013.

Non-GAAP net loss for the fourth quarter of 2014 was $6.9 million, or $0.41 per basic and diluted share, compared to a loss of $15.2 million, or $0.92 per basic and diluted share in the fourth quarter of 2013. Non-GAAP net loss for 2014 was $34.6 million, or $2.03 per basic and diluted share, compared to a loss of $51.9 million, or $3.23 per basic and diluted share, in 2013. See "Use of Non-GAAP Financial Measures" and "Reconciliation of GAAP to Non-GAAP Net Loss per Common Share."

At December 31, 2014, HeartWare had $179.7 million of cash, cash equivalents and investments, a $1.8 million reduction from the end of the third quarter 2014.