Advanced Neuromodulation (NASDAQ:ANSI)
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Advanced Neuromodulation Systems Reports First Quarter Results
Revenue Increases 21%
DALLAS, April 28 /PRNewswire-FirstCall/ -- Advanced Neuromodulation Systems,
Inc. (NASDAQ:ANSI) (ANS) today announced operating results for the first
quarter, provided a review of its strategy and recent accomplishments, and
updated guidance for 2005.
First Quarter Results
For the three months ended March 31, 2005, revenue increased 21.4% to a record
$32,335,000 from $26,633,000 for the first quarter of 2004. Sales of neuro
products increased 18.5% to $28,717,000 for this year's first quarter compared
to $24,228,000 a year earlier, as sales of ANS' Genesis(R) and GenesisXP(TM)
implantable spinal cord stimulation (SCS) systems for the treatment of chronic
pain continued to perform well in the marketplace. Gross margin was 74% for
both periods. Net income for the first quarter of 2005 was $58,568,000, or
$2.76 per diluted share. This compares to net income for the first quarter of
2004 of $3,969,000, or $0.19 per diluted share. Net income for this year's
first quarter included a pre-tax gain of $85,244,000 from the previously
announced sale of Cyberonics common stock acquired in August 2004. Excluding
the effects of this gain as reconciled in the attached table, earnings for this
year's first quarter were $0.22 per diluted share.
At March 31, 2005, ANS had total cash and marketable securities of
approximately $181 million. ANS has no debt.
Board Increases Share Repurchase Authorization to 2,000,000 Shares
To date, the company has repurchased 923,674 shares of its common stock under a
1,000,000-share repurchase authorization. ANS announced today that the Board
of Directors has increased the repurchase authorization to a total of 2,000,000
shares. Repurchases may be made from time to time in open market or privately
negotiated transactions, subject to price and availability, and financed out of
working capital. "The Board of Directors believes that ANS common stock is an
attractive investment, and repurchasing shares is a sound use of working
capital under the right circumstances," said President and CEO Chris Chavez.
Following its repurchases to date, ANS currently has about 19.8 million issued
and outstanding shares.
Strategic Review
Chavez continued: "The interventional neuromodulation market now exceeds one
billion dollars, and promises to become a multi-billion dollar, multi-
indication modality in the years ahead. As described in the cover story in the
March 7, 2005 edition of Business Week, as well as in recent feature stories in
Time, the Wall Street Journal, and in a week-long segment on the Today Show,
the clinical indications that neuromodulation can address are large,
under-served and under-penetrated. Now more than ever, neuromodulation holds
the promise to improve the quality of life for millions of people who suffer
from chronic pain and other chronic diseases. With the increasing awareness of
the benefits of neuromodulation, we are increasingly excited about our mission
to develop ever-improving neuromodulation technologies to address an expanding
set of clinical indications.
"As we announced last quarter, we have decided to pursue new indications for
our technology more aggressively, by accelerating clinical studies, regulatory
approval efforts and product development. We are leveraging our platform
technologies into emerging clinical applications that we believe will fuel
strong organic growth for years to come. In addition to planned pivotal
studies to treat migraine headaches, essential tremor and Parkinson's disease,
we are systematically incubating such promising new indications as depression,
pelvic pain, obesity, tinnitus, angina, ischemic pain associated with
peripheral vascular disease, and traumatic brain injury. ANS also recently
acquired exclusive intellectual property rights to stimulate a specific target
in the brain to treat Obsessive Compulsive Disorder (OCD), and we hope to
initiate a pilot study to further evaluate safety and efficacy for this
indication."
Received FDA Approval Of Its Second Rechargeable IPG
ANS recently received FDA approval to market and sell its second rechargeable
implantable pulse generator (IPG), the Eon(TM) Neurostimulation System. This
was ANS' second rechargeable system to be approved by the FDA since December
2004. "With approval of our new Eon system now in hand, we are manufacturing
product to support a limited launch in the second quarter and a full market
launch in the third quarter of 2005," Chavez said.
"We believe that ANS has the broadest, most advanced product offering in the
industry to address the diverse needs of interventional pain physicians and
their pain patients who suffer from chronic pain. ANS offers a full array of
spinal cord stimulation devices to meet this demand, including two rechargeable
IPGs, five conventionally powered IPGs and radio-frequency powered stimulators.
Additionally, ANS' Axxess(R) neurostimulation leads, designed for superior
handling and precise placement, recently received a 2005 Medical Design
Excellence Award (MDEA). We firmly believe that each kind of system has its
place in the treatment armamentarium. With our impressive list of generators
and equally impressive list of leads and programmers, ANS is uniquely
positioned to address the broad needs of the market at many different price
points," Chavez added.
Received FDA Approval For Pivotal Study of Migraine Headache
ANS also has received approval from the FDA to expand its feasibility study to
a pivotal study of neurostimulation for the treatment of migraine headache.
The first implants are expected in the second quarter. "We expect the results
of this pivotal trial to support a future PMA submission for chronic headache.
With an estimated 2.2 million people in the U.S. who suffer from severe
migraines, we believe that this application has significant clinical
potential," Chavez said.
Received IDE to Investigate DBS System For Essential Tremor
ANS recently received an FDA Investigational Device Exemption (IDE) approval to
implant 160 patients at 12 sites to investigate the safety and efficacy of the
ANS Libra(TM) Deep Brain Stimulation (DBS) System to treat essential tremor.
The company has identified a number of sites for the clinical study. The first
implants of the Libra DBS System to treat essential tremor are anticipated to
occur in the second quarter.
Received IDE to Investigate DBS System For Parkinson's Disease
ANS also received IDE approval from the FDA to implant 136 patients at 12 sites
to investigate the safety and efficacy of the ANS Libra DBS System to treat
Parkinson's disease. The company has identified a number of sites for the
clinical study. The first implants of the Libra DBS System to treat
Parkinson's disease are anticipated to occur in the second quarter.
"With these two approvals for essential tremor and Parkinson's, we are moving
into the deep brain stimulation arena, which presents many new growth
opportunities for our platform technologies to address various neurological
conditions," Chavez said. "Estimates of the prevalence of these two conditions
vary significantly, but it is generally estimated that approximately 1.9
million people in the U.S. alone suffer from Parkinson's disease, while
approximately 5 million people in the U.S. suffer from essential tremor. An
independent market research firm estimates that the market for DBS for these
specific indications will grow to approximately $180 million by 2008 and will
continue to grow as improvements in the procedure and stereotactic targeting
are made."
Acquired Exclusive Rights For Method To Treat Depression Through DBS
ANS also recently announced that it has acquired exclusive rights to
intellectual property covering a unique method of treating chronic treatment-
resistant depression through DBS. The highly-respected neuroscience journal
Neuron recently reported clinical results in a depression research study using
this method of deep brain neurostimulation. Authored by noted clinical
researchers including the inventors, the article reports "a striking and
sustained remission of depression in four of six patients."
Treatment-resistant depression, or TRD, is a severely disabling disorder with
very limited proven treatment options once multiple medications, psychotherapy
have failed and electroconvulsive therapy has either been declined or failed.
The National Institutes of Health (NIH) estimate that 9.9 million adult
Americans suffer from major depressive disorder. Research indicates that
approximately 20% of these patients are resistant to existing treatments.
Approximately 100,000 people in the United States are treated with
electroconvulsive therapy (ECT) each year.
"We caution that these results cover only six patients, follow-up was limited,
and no sham surgery or systematic placebo control arm was used. Despite these
and other limitations in this research, the response rate in these patients is
striking given their extreme resistance to other treatments and the
well-documented low placebo response in these patients. Based on the strength
of this study, we are pursuing a multi-center feasibility study to further
evaluate efficacy, and if the expanded study continues to impress, ANS intends
to pursue a pivotal trial for this important application," Chavez said.
Management Updates Guidance for 2005
Chavez said that management continues to expect revenue for 2005 of
approximately $145 million.
With respect to the earnings outlook for 2005, the CEO continued, "As
previously announced, we have decided to accelerate our pursuit of new
indications for our technology more aggressively, by accelerating clinical
studies, regulatory approval efforts and product development. While we will
remain focused on profitable bottom-line performance and growth in our core
pain business, we continue to expect to significantly increase our investment
in clinical studies, regulatory and R&D in 2005 compared to 2004. Including
the impact of these increases, we currently expect net income for 2005 in the
range of $3.49 to $3.52 per diluted share."
Conference Call
ANS has scheduled a conference call today at 11:00 a.m. EDT. The simultaneous
webcast is available at http://www.ans-medical.com/investors . A replay will
be available at this same Internet address, or at (800) 633-8284, reservation
#21244484, after 1:00 p.m. EDT.
About Advanced Neuromodulation Systems
Advanced Neuromodulation Systems designs, develops, manufactures and markets
implantable systems used to manage chronic intractable pain and other disorders
of the central nervous system. Fortune magazine recently ranked ANS as the 8th
fastest growing small company in its annual list of the Top 200 Fastest Growing
Small Companies in the United States. Forbes magazine recently recognized ANS
as one of America's 200 Best Small Companies. Frost & Sullivan, an
international strategic market research firm, also recently presented ANS with
its Product Innovation Award, recognizing ANS as the technology innovation
leader in the neurostimulation market and ANS' Genesis(R) Implantable Pulse
Generator system as the most advanced fully implantable spinal cord stimulator
on the market. Additional information is available at
http://www.ans-medical.com/ .
"Safe harbor" statement under the Private Securities Litigation Reform Act of
1995:
Statements contained in this document that are not based on historical facts
are "forward-looking statements." Terms such as "plan," "should," "would,"
"anticipate," "believe," "intend," "estimate," "expect," "predict,"
"scheduled," "new market," "potential market applications" and similar
expressions are intended to identify forward-looking statements. Such
statements are by nature subject to uncertainties and risks, including but not
limited to market acceptance of our new rechargeable IPGs, as well as continued
market acceptance of our conventional IPGs and radio-frequency powered SCS
systems; competition from and the launch of new competitive products by
Medtronic, Advanced Bionics/Boston Scientific or others, as well as other
market factors that could impede growth in or reduce sales of the Company's IPG
and RF systems, which could adversely affect revenues and profitability;
patient or physician selection of less invasive or less expensive alternatives;
adverse changes in coverage or reimbursement amounts by Medicare, Medicaid,
private insurers, managed care organizations or workers' comp programs;
intellectual property protection and potential infringement issues; the cost,
uncertainty and other risks inherent in litigation generally, including without
limitation the intellectual property and patent litigation against Advanced
Bionics; obtaining necessary government approvals for other new products or
applications and maintaining compliance with FDA product and manufacturing
requirements; product liability; reliance on single suppliers for certain
components; completion of research and development projects in an efficient and
timely manner; successful patient enrollment in and timely implementation of
the IDE clinical studies for migraine headache, Essential Tremor and
Parkinson's disease; physician and patient acceptance of the Libra DBS system
for the Essential Tremor and Parkinson's disease studies, for which
already-approved products are already available on the market; the uncertainty
of clinical results that may ensue from these clinical studies; the risk that
the FDA may not approve our PMA applications for these applications following
the completion of the clinical trials; the satisfactory completion of
feasibility, pilot and pivotal studies and/or market tests prior to the
introduction of new products generally; successful integration of acquired
businesses, products and technologies; international trade risks; and other
risks detailed from time to time in the Company's SEC filings. In addition,
despite the encouraging results reported in the Neuron article, there are
limitations to this first study of DBS for TRD. Sample size was small,
follow-up was limited, and no sham surgery or systematic placebo control arm
was used. There were also limitations on identifying markers that might
predict response. Differences in electrode targeting and placement may have
also contributed to the observed response variance. The mechanisms of action
of DBS are incompletely understood. These and other factions require testing
of additional subjects. Consequently, if such management assumptions prove to
be incorrect or such risks or uncertainties materialize, anticipated results
could differ materially from those forecast in forward-looking statements.
Such forward-looking statements speak only as of the date on which they are
made, and the Company does not undertake any obligation to update any
forward-looking statement to reflect events or circumstances after the date of
this release.
Advanced Neuromodulation Systems, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
Three Months Ended
March 31,
2005 2004
Net revenue $32,335,463 $26,632,863
Cost of revenue 8,446,834 6,965,532
Gross profit 23,888,629 19,667,331
Operating expenses:
Sales and marketing 10,090,319 8,564,046
Research and development 3,324,707 2,314,950
General and administrative 3,343,454 2,316,740
Amortization of intangibles 639,980 574,874
17,398,460 13,770,610
Income from operations 6,490,169 5,896,721
Other income (expense):
Gain on sale of marketable securities 85,244,301 ---
Foreign currency transaction loss (47,625) (29,347)
Investment income 546,861 251,329
85,743,537 221,982
Income before income taxes 92,233,706 6,118,703
Income taxes 33,665,303 2,150,112
Net income $58,568,403 $3,968,591
Basic income per share:
Net income $2.88 $.20
Number of basic shares 20,366,990 19,928,946
Diluted income per share:
Net income $2.76 $.19
Number of diluted shares 21,192,297 21,187,163
ADVANCED NEUROMODULATION SYSTEMS, INC. and SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
March 31, December 31,
2005 2004
Assets
Current assets:
Cash and marketable securities $180,676,803 $124,016,064
Receivable, trade net 25,598,912 25,322,813
Receivable, interest and other 1,106,898 638,987
Inventories 24,754,210 23,923,851
Deferred income taxes 1,994,747 2,029,091
Prepaid expenses and other current assets 1,357,241 1,888,957
Total current assets 235,488,811 177,819,763
Net property, equipment and fixtures 33,277,977 33,175,329
Minority equity investments in preferred
stock 1,104,000 1,104,000
Goodwill, patents, tradenames, purchased
technology & other assets, net 35,342,461 35,388,049
Total assets $305,213,249 $247,487,141
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $2,688,037 $3,206,516
Accrued salary and employee benefit costs 1,933,556 2,390,721
Accrued commissions 1,579,853 2,656,112
Income taxes payable 33,526,811 708,412
Deferred revenue 107,028 165,861
Other accrued expenses 445,318 342,075
Total current liabilities 40,280,603 9,469,697
Deferred income taxes 6,056,418 14,734,487
Non-current deferred revenue 670,362 718,820
Total stockholders' equity 258,205,866 222,564,137
Total liabilities and stockholders'
equity $305,213,249 $247,487,141
Advanced Neuromodulation Systems, Inc. and Subsidiaries
Non-GAAP Reconciliation
(Unaudited)
Three
Months Ended
March 31,
2005
Impact of Cyberonics, Inc. Gain
Income before income taxes $92,233,706
Gain on sale of Cyberonics, Inc. investment,
net of acquisition costs (85,244,301)
Income before gain on sale of Cyberonics, Inc.
investment and income taxes 6,989,405
Income tax expense 33,665,303
Impact of gain on sale of Cyberonics investment (31,267,937)
Income tax expense before gain on sale of
Cyberonics, Inc. 2,397,366
Net income before gain on sale of Cyberonics,
Inc. investment $4,592,039
Number of diluted shares 21,192,297
Diluted income per share $.22
Note: The Company believes that the Non-GAAP measurement of net income
before the gain on sale of Cyberonics, Inc. investment assists
investors in understanding the impact on the Company's diluted
earnings per share of the gain on sale of Cyberonics, Inc.
investment. The Company's effective tax rate of 36.5% was
adjusted to 34.3% for purposes of the Non-GAAP measurement above,
which closely approximates the Company's 2004 effective tax rate
of 34.4%.
DATASOURCE: Advanced Neuromodulation Systems, Inc.
CONTACT: investors, Neil Berkman Associates, +1-310-277-5162, or
, for Advanced Neuromodulation Systems, Inc.; or
Chris Chavez, President & CEO of Advanced Neuromodulation Systems, Inc.,
+1-972-309-8000
Web site: http://www.ans-medical.com/
http://www.ans-medical.com/investors