AGA Medical Holdings (NASDAQ: AGAM), a leading developer of interventional medical devices for the minimally invasive treatment of structural heart defects and vascular disease, reported financial results for the third quarter ended September 30, 2009.
Highlights of the third quarter of 2009 and other recent developments include:
* Closed its initial public offering on October 26, 2009, raising net proceeds to AGA Medical of $88.2 million, with its stock beginning trading on the NASDAQ Global Select Market under the symbol “AGAM”;
* Received CE Mark in July 2008 for the AMPLATZER Vascular Plug 4, which can be delivered through standard diagnostic catheters with the advantage of no additional cost or time required to exchange from a diagnostic catheter to a therapeutic delivery catheter, meaningfully expanding the addressable market for the Vascular Plug family;
* Expanded the limited commercial launch of the AMPLATZER Cardiac Plug, which had received CE Mark in December 2008 for left atrial appendage occlusion, beyond Europe including completing the first cases in South America, Israel and Hong Kong and receiving device approval and reimbursement authorization in Australia;
* Continued enrollment in its pivotal RESPECT study designed to study whether patent foramen ovale (PFO) closure is superior to medical management in preventing recurrent stroke, with 632 patients enrolled in the study with 1,160 patient follow-up years as of October 30, 2009;
* Received approval to change the protocol in its PREMIUM study (designed to measure whether PFO closure can result in a meaningful reduction in the number and severity of migraine headaches in certain patients with a PFO), which broadens the inclusion criteria and reduces the number of patients to be enrolled in the trial from 470 to 230 patients.
Financial Results for Third Quarter 2009 vs. Third Quarter 2008
Net sales for the third quarter of 2009 were $50.2 million, a 14.9% increase over $43.6 million for the third quarter of 2008. On a constant currency basis, net sales grew 17.2% year over year.
Gross margins for the third quarter of 2009 were 86.8% compared to 84.7% in the prior year period. The increase in gross margin was due to higher average selling prices (ASPs) from the distributor to direct conversions completed earlier this year and manufacturing efficiencies. Gross margins were also sequentially up from the first and second quarters of 2009, which were 80.2% and 83.6%, respectively. In the first two quarters of 2009, gross margins were unfavorably impacted as the company amortized the excess cost of inventory repurchased from seven distributors in territories that AGA Medical converted to direct distribution at the beginning of 2009.
Total operating expenses for the third quarter of 2009 were $38.6 million compared to $27.3 million in the third quarter of 2008. The expense increase is primarily attributable to increased selling, general and administrative expenses of approximately $5.0 million representing AGA Medical’s investment in infrastructure to support the distributor conversions primarily in Europe and U.S. sales channels, increased legal fees of $3.3 million as compared to the same period in the prior year that are primarily associated with patent litigation expenses related to the Medtronic trial that occurred in the third quarter, and higher amortization of $1.1 million primarily due to the accelerated repurchase of the company’s distribution rights in Italy from its former distributor.
The company reported net income (loss) applicable to common stockholders of ($2.4) million, or ($0.11) per fully diluted and basic share, for the three months ended September 30, 2009, compared to $1.8 million, or $0.04 per fully diluted share and $0.05 per basic share for the prior year period. The net income (loss) includes the dividends for Series A and Series B preferred and Class A common stock accrued in the period. Net income before dividends was $2.2 million, or $0.05 per fully diluted share and $0.06 per basic share, for the third quarter 2009, versus $5.9 million, or $0.14 per fully diluted share and $0.15 per basic share in the third quarter 2008. The accrued dividends on these securities and the securities associated with these dividends were converted into common stock in connection with the initial public offering. See “Statement regarding Non-GAAP Financial Measures.”
EBITDA (net income (loss) before interest income, interest expense, provision (benefit) for income tax, and depreciation and amortization) was $12.5 million in the third quarter 2009 versus $14.7 million in the prior year period. EBITDA margin was 24.9% for the third quarter 2009, compared to 33.6% for the third quarter 2008. See “Statement regarding Non-GAAP Financial Measures.”
Cash and cash equivalents were $13.9 million as of September 30, 2009, representing a $5.1 million increase from cash and cash equivalents of $8.8 million as of June 30, 2009.
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